Tax crackdown on co-ops may net $100 million
Investigators say some residents under-reported home sales prices
Hidden real estate practices revealed by whistleblowers could add up to $100 million in property value to the tax rolls in a crackdown started recently by the Broward County Property Appraiser's Office.
Under scrutiny are the values of the county's 12,000 co-ops, an old-fashioned way for a group to share ownership and financial responsibilities of a multifamily building or mobile home park.
Some co-op homeowners potentially face steep hikes in the appraisals used to set their tax bills -- some three-fold -- because they may have been assessed for substantially less than they are worth. A $100 million hike in property value roughly equals $2 million in tax revenue.
Property Appraiser Lori Parrish and her staff say they have discovered documents filed with the county that do not reflect the full sale price of co-op residences used to set assessments, and there are indications lawyers have advised co-ops on how to skirt the tax system.
They also have talked to co-op residents who say their board told them that they could buy and move in if they agreed to record only part of the sale prices. In one co-op community, investigators for Parrish are working with State Attorney Mike Satz to issue subpoenas to review private sales records.
"We want to make sure no one is gaming the system and making everyone else pay more in taxes," Parrish said.
The questions about co-op values in Broward come at a time when state legislators are exploring an overhaul of the state property tax system. One of the key issues has been whether everyone is paying their fair share. So far, the focus has been how those with property tax breaks stack up against businesses, snowbirds, new homebuyers, landlords and others without that coveted protection.
The potential that co-op assessments will now skyrocket in Broward worries some city officials and others who say residents may sell and leave because they won't be able to afford higher bills.
"We'll have a glut of homes on the market," said Pembroke Park Town Manager Bob Levy, whose community has about 900 co-ops in two mobile home parks.
Cooperatives, which comprise a relatively small portion of 650,000 residences in Broward, are multifamily properties similar to condos. Condo buyers purchase their unit and share the cost of maintaining common elements such as a pool or elevator. Co-op buyers purchase shares of stock in the ownership of the property and are assigned their unit.
County appraisers said co-ops have always been harder to assess than condos.
The property deeds drawn up by lawyers and title companies when a condo or single-family home is sold do not exist for co-ops. Public financing records available on other types of property are rare in co-op deals because many of the residences are purchased with cash. Both the title and financing records are key documents that appraisers use in setting the tax value on property.
Joe Zdanowicz, the longtime chief appraiser for the Property Appraiser's Office, said to set the value of co-ops the agency relied for decades on stock transfer records that are filed with the county. He and his staff were stunned to find major flaws in that system.
Zdanowicz said the Property Appraiser's Office may seek state legislation to require more accurate records, but in the meantime it is attempting to find a better way to assess co-ops.
Palm Beach County also has had trouble appraising co-ops but has not seen similar discrepancies. The lead appraiser of condos and co-ops in Palm Beach said the office updated its procedures over the past two years after concluding it had not been tracking all sales and did not have a good gauge on co-op values.
Issues with co-op values exist throughout Broward, according to Parrish and her staff.
Some certificates detailing co-op transfers that have been filed with the county report little to no value or state something less than the full sales price.
One co-op building is assessed at $148 per square foot for the land and building even though two nearby vacant lots have sold for $182 and $220 per square foot.
Another co-op building had been assessed at $150,000 per unit, but an owner accidentally sent the Property Appraiser's Office a copy of his mortgage for $500,000.
In another co-op, similar units are listed in county records as selling for as little as $37,000 and as much as $100,000 in the past year.
Co-op apartment owner Melva Cartwright, an 81-year-old Hillsboro Beach resident, said she attempted for years to convince the county that there is a problem with co-op values. Three years ago, she flagged her own three-bedroom unit as being under-assessed and forced the county to hike her assessment from $347,000 to $558,000.
"It's a shame what's happening, and it just frustrated me," Cartwright said.
Parrish and her staff said they have found one co-op that is particularly troubling: Dale Village in Pembroke Park.
A 330-unit mobile home park off Hallandale Beach Boulevard, Dale Village is populated mainly by French Canadian snowbirds. Property Appraiser's Office administrators say a whistleblower tipped them that mobile homes in the park have been selling for $100,000 to $160,000 even though county records for many of the sales list values from $35,000 to $65,000.
Investigators for Parrish interviewed two residents who said they were selling their homes for $165,000 and $185,000. They also found a bulletin board and a co-op Web site listing sales prices above $100,000.
According to the investigative files in Parrish's office, one Dale Village couple said they paid $75,000 for their home two years ago even though county records list only $40,000. Another resident at first said she paid $159,000, but later said the price was $60,000.
Ron Cacciatore, Parrish's chief investigator, has persuaded state prosecutors to subpoena Dale Village's sales records. He said he is concerned about the possibility of fraud and will seek criminal charges if he finds any evidence in those records.
The county assesses most units at Dale Village at about $50,000 and plans to raise the values to $150,000.
Dale Village's president, Serge Boyer, acknowledged some homes have sold for more than $100,000. But he said there has been no attempt to defraud the county and that he will hire a private appraiser to fight extreme increases.
He said $50,000 represents the cost of each unit's share in the co-op association and does not include the mobile home. He said some sales include as much as $60,000 in untaxable furniture.
"They are trying to hit a homerun, and I'm in complete disagreement over that and will fight," Boyer said.
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