A Tax Abatement Tangle

SCHUSTERMAN V SUTTON HOUSE INC.

WHAT HAPPENED Tracey Schusterman has lived in her apartment in the Sutton House co-op since 2002. Because it is her primary residence, she is eligible for a New York City property tax abatement. However, in January of 2020, the co-op told her that her tax abatement was revoked by the city. She was charged an assessment on her maintenance bill roughly equal to the amount of the abatement. Schusterman told the co-op that the revocation was in error and followed up with the managing agent for two years to get this straightened out. At first, she was assured that she would not have to pay the assessment, but in July 2022 the co-op formally demanded payment and said it was her responsibility, not the co-op’s, to resolve the abatement issue with the Department of Finance (DOF). She responded that as an individual shareholder she didn’t have the standing to challenge the DOF decision, but the co-op insisted otherwise. Schusterman paid the assessment. When Sutton House changed management companies in 2023 the co-op revisited the issue and in April 2023, DOF confirmed via email that she was entitled to the abatement going all the way back to 2018. She notified the co-op of the incorrect billing and requested reimbursement for the fees that were charged in error, but Sutton House ignored this request.

IN COURT In August 2023, Schusterman sued the co-op asserting several causes of action, including damages for the money she paid and for approximately $18,000 in legal fees. This resulted in months-long settlement discussions where the co-op finally refunded the tax abatement amount, but argued that it was not responsible for the attorney’s fees. It then filed a motion to dismiss the case, which the court did, but it said only because Schusterman did not clearly explain how the co-op violated the “implied covenant of good faith and fair dealing” in her proprietary lease. In 2024 Schusterman filed a new lawsuit, making the same claim but drafting the complaint differently. She also sought attorney’s fees for both lawsuits under the terms of the lease. The co-op again asked the court to dismiss the case, arguing that the matter had already been decided (using legal principles called res judicata and collateral estoppel). However, the judge ruled that the first case had not been decided on the merits – it was only dismissed because the complaint was not written clearly enough. Since the earlier dismissal was not a final decision on the actual issues, the court refused to dismiss the new case.