United States: New York City Ramps Up Efforts to Enforce the Prevailing Wage Requirement of Its 421-a Affordable Housing Tax Exemption

Executive Summary: Owners of 421-a tax exempt buildings and developments should practice extreme caution when considering responding (or failing to respond) to the recent notices (Notices) sent by the City of New York Department of Housing Preservation and Development (HPD), New York State Office of Attorney General (NYSOGA) and the New York City Comptroller's Office (Comptroller) concerning prevailing wage compliance. These Notices signal the start of an aggressive enforcement effort of the prevailing wage requirement that accompanies the 421-a exemption.

New York City can be an expensive place to do business. Even something advertised as free—as a tax abatement or even exemption— comes at a hefty price. Recently, Notices were issued jointly by HPD, NYSOAG and the Comptroller to owners of real estate developments enjoying tax exemptions under Real Property Tax Law (RPTL) § 421-a (421-a tax exemption). The Notices require owners of 421-a tax exempt buildings to provide certified statements confirming payment of prevailing wages under Article 9 of the New York Labor Law (NYLL) to building service employees working in their 421-a tax exempt buildings, and disclosing all efforts to ensure compliance with the prevailing wage requirement. The Notices signal an aggressive enforcement effort by HPD, NYSOAG and the Comptroller to ensure compliance with the NYLL and RPTL.

Requirement to Pay Prevailing Wages under 421-a Exemption

While many building owners engage building services companies to manage and perform janitorial, security and other building services work, the law places the onus on the building owners to ensure their building services providers pay prevailing wages to the affected workers. It is crucial for property and development owners to determine whether the prevailing wage requirement applies to their properties.

The 421-a requirement applies to all multiple dwellings receiving tax benefits pursuant to the Affordable Housing Exemption for which construction began after December 27, 2007, and that contain fifty or more dwelling units. The owners of such properties must ensure payment of prevailing wages to all building service employees for the length of the tax abatement, unless they received a certification of exemption1 by HPD. A building service employee is defined as "any person who is regularly employed at a building who performs work in connection with the care or maintenance of such building." See RPTL 421-a(8); N.Y. Lab. Law § 230(1). Such an employee "includes, but is not limited to, watchman, guard, doorman, building cleaner, porter, handyman, janitor, gardener, groundskeeper, elevator operator and starter, and window cleaner, but shall not include persons regularly scheduled to work fewer than eight hours per week in the building." Id.  

What Are Prevailing Wages?

Article 9 of NYLL governs payment of prevailing wages to service employees. Specific wage rates are established based on job duties and occupations of the workers. Applicable wage rates can be found in wage schedules promulgated by either the New York State Commissioner of Labor or the Comptroller. Prevailing wage requirements under Article 9 of NYLL not only govern rates of pay for building services workers, but also require payment of fringe benefits in addition to payment of the prevailing wage rate. The requirements set forth rules that affect a wide range of terms and conditions of work. The law further places strict payroll reporting and record retention requirements on employers, such as submission of certified payrolls attesting to the truth and accuracy of hours worked and wages paid to workers and maintenance of these time and pay records for a minimum of six years.

What Does This Mean for Building Owners?

These Notices and the prevailing wage requirement must be taken seriously. Since the Notices require building owners to certify to HPD that service employees working at their 421-a tax exempt buildings have been paid prevailing wage rates, and furnish detailed information regarding the work classification and payments to workers, building owners must tread carefully in furnishing a response to the Notices. Admission by building owners to non-compliance with the prevailing wage requirement will result in loss of tax benefits and exposure to liability for underpayment of  wages. A failure or refusal to respond by a building owner may trigger further investigation by NYSOAG, HPD or the Comptroller. A response containing false or inaccurate representations will expose the building owner to significant legal liability. This may further result in the referral by HPD for criminal prosecution on the basis of filing of false instruments or violation of mail or wire fraud statutes. 

To ensure compliance with the prevailing wage requirements under the 421-a tax exemption, building owners who self-manage building services workers in 421-a tax exempt buildings must ensure that the required wages and supplemental benefits are paid to their janitors, cleaning staff, doorpersons, security staff, porters and other building services staff. To the extent that these owners seek to satisfy their supplemental benefits portion of prevailing wages through their existing fringe benefit plans, they must make sure that contributions made to their fringe benefit plans are made on an "annualized basis." Building owners should also consult the applicable prevailing wage schedule concerning their obligations in meeting hours worked rules, holidays, paid time off, overtime and premium time requirements. 

Building owners who engage building management companies to provide building services work at their 421-a tax exempt buildings must take steps to ensure that the building services contracts with these building management companies contain terms specifically providing that payment of prevailing wages is a material obligation under these contracts and include applicable prevailing wage schedules in the contracts. Building owners must also require their management companies to submit certified payrolls as part of their invoicing process. These certified payrolls must be supported by time records and cancelled checks or paystubs. Upon inquiry by the enforcement agencies (i.e. NYSOAG, HPD and the Comptroller), building owners must be able to demonstrate compliance with the prevailing wage requirements through certified payroll documents from their management companies showing that appropriate wage rates and fringe benefits were paid and provided to the affected workers for hours worked at the covered buildings.

Finally, Article 9 includes job site posting requirements with which building owners must comply, as well as the requirement that prevailing wage schedules be available to workers. Building owners who perform their own building services work must be aware of these requirements. If building owners engage others to perform building services work, a best practice is to include such requirements in the operative contact and, further, make the posting of notices and the availability of prevailing wage schedules material terms of that contract.

Ultimately, both responding incorrectly or inaccurately and failing to respond to these Notices can result in serious consequences including protracted investigations and sanctions. If you have received one of these Notices, you should begin a thorough review of the contracts, payroll records, paystubs and all other supporting records related to the 421-a tax exempt property. To implement a compliance plan, and avoid sanctions and investigations to the extent possible, we recommend that owners of 421-a tax exempt buildings and developments seek the advice of counsel.  


1 To receive certification of exemption, HPD must certify that (1) the project reached the affordable housing ratio exemption standard, which requires that, at initial occupancy, at least 50 percent of dwelling units were affordable to individuals or families with a gross household income at or below 125 percent of Area Median Income— and (2) that those units in rental buildings will be subject to restrictions to ensure that they will remain affordable for the entire 421-a benefit period.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions