April 10, 2019
Advantage Title: Industry Bulletin 2019-02
Increases to the Real Estate Transfer Tax
The approved budget for New York State Fiscal Year 2020, which runs from April 1, 2019 to March 31, 2020, includes two provisions that increase the Real Estate Transfer Tax in limited instances. These provisions are contained in Part OOO of the Budget Bill (the “Act”) which can be accessed here. The relevant portions of the Act increase the Real Estate Transfer Tax by amending Section 1402 of the Tax Law and adding a new Section 1402-b. The Act also revises Section 1421 of the Tax Law. That revision is not addressed herein.
The Act takes effect on July 1, 2019. It applies to conveyances closing on or after July 1, 2019. However, the increased rates will not apply to transactions closing on and after July 1, 2019 if the conveyance was made pursuant to a binding written contract entered into on or before April 1, 2019, “provided that the date of execution of such contract is confirmed by independent evidence, such as the recording of the contract, payment of a deposit or other facts and circumstances as determined by the Commissioner of Taxation and Finance.” At this point, we do not have any guidance from the New York State Department of Taxation and Finance (the “Department”) on this narrow exception to the effective date of the Act.
LOCATION OF AFFECTED PROPERTIES
The revisions to Section 1402 and new Section 1402-b apply only to real property located in any city in New York having a population of one million or more. Currently, these changes would only apply to real property located within the five boroughs of New York City.
NEW YORK STATE TRANSFER TAX
The current rate of the New York State transfer tax (“RETT”) provided for in Section 1402 of the Tax Law is 0.4% ($2.00 per $500.00 of consideration or $4.00 per $1,000.00 of consideration). The Act increases the RETT as follows:
- 0.65% ($3.25 per $500.00 of consideration or $6.50 per $1,000.00 of consideration) for conveyances of residential real property where the consideration is $3,000,000.00 or more.
- 0.65% ($3.25 per $500.00 of consideration or $6.50 per $1,000.00 of consideration) for conveyances of any property other than residential real property where the consideration is $2,000,000.00 or more.
For purposes of Section 1402, residential real property is defined as “any premises that is or may be used in whole or in part as a personal residence, and shall include a one, two, or three-family house, an individual condominium unit, or a cooperative apartment unit.”
The RETT is paid by the Grantor and is subject to the exemptions and conditions contained in the Tax Law.
MANSION TAX – NEW SUPPLEMENTAL “MANSION TAX”
The current rate of the Additional Tax a/k/a Mansion Tax provided for in Section 1402-a is 1% of the consideration for the transfer of residential real property of $1,000,000.00 or more. The Act adds Section 1402-b which provides for a new tax, referred to as the Supplemental Tax, which is in addition to the existing Mansion Tax on residential real property. The Supplemental Tax is a progressive tax which increases based upon tiers of consideration beginning at $2,000,000.00.
For purposes of Section 1402-b, residential real property is defined as “any premises that is or may be used in whole or in part as a personal residence, and shall include a one, two, or three-family house, an individual condominium unit, or a cooperative apartment unit.”
The Mansion Tax and Supplemental Tax are paid by the Grantee.
In addition, the Act provides that the Mansion Tax and Supplemental Tax are now the joint and several liability of the Grantor and the Grantee. If the Grantee fails to pay the tax or is exempt from payment of the tax, the Grantor and Grantee are jointly and severally liable for the taxes.
REVISED TAX RATES
The revised tax rates are provided in a chart which can be downloaded here.
We anticipate guidance on the Act in the coming months from the Department. We will advise of any further developments concerning the Act.
Please contact Drew Steigler, Chief Underwriting Counsel, at
631.424.6100 or firstname.lastname@example.org
with any questions concerning this Bulletin.