New York State imposes a transfer tax on conveyances for both commercial and residential real property located within the state. The current transfer tax rate for New York State is 0.4%. Additional transfer taxes may also be imposed depending on certain counties and municipalities within New York.
Typically, transfer taxes are paid by the sellers or the grantor. The parties can also negotiate, as part of their contract, that the purchaser is required to pay the transfer taxes; the purchaser paying the transfer tax is typically only common with new construction.
Conveyances of Real Property Subject to Transfer Taxes
Transfer taxes become due and payable when the transfer of any interest in real property is conveyed. A conveyance is a transfer by sale, exchange, assignment, surrender, option, eminent domain, foreclosure, and deed in lieu foreclosure. With regards to transfer taxes, a conveyance includes:
- The sale of a fee interest in real property;
- a leasehold grant or sublease;
- an assignment of a leasehold interest;
- transfer of a controlling interest in any entity that owns real property in New York;
- the sale of a cooperative apartment;
- an option or contract to purchase real property with the right to use or occupancy of the property;
- an easement or other encumbrance;
- the surrender of a leasehold interest; and
- the transfer of development or air rights;
A conveyance for the purposes of transfer taxes is not considered to be a devise, bequest or inheritance; a creation, modification, extension, spreading, severance, consolidation, assignment, transfer, release, or satisfaction of a mortgage; or a release of a tax lien.
Consideration is the price paid, or required to be paid, for the real property interest acquired.
Transfer taxes are not payable unless the consideration exceeds a minimum amount, including:
- Transfer tax is imposed by the State of New York when the consideration or value of the conveyance exceeds $500.
- Real property transfer tax applies in New York City when the sale or transfer exceeds $25,000
- Real property transfer tax applies in the City of Yonkers when the sale of transfer exceeds $25,000
- A transfer tax is imposed by the City of Mount Vernon when the sale or transfer exceeds $100,000
Types of Conveyances
There are numerous types of conveyances that are subject to transfer taxes. Leasehold interests are typically subject to transfer taxes, as well as controlling interests and real estate investment trusts (REIT). A leasehold interest is only subject to transfer taxes depending on the interests conveyed. A controlling interest is having 50% or more of voting power in a corporation or 50% or more of capital, profits, or beneficial interests in a partnership or trust. A real estate investment trust is a conveyance of real property to a real estate investment trust, which may qualify for a reduced transfer tax rate of $1.00 for every $500.00. To qualify for a reduced transfer tax rate in a REIT, the grantor must receive, as part of the consideration for the conveyance, an ownership interest in the REIT or in an entity controlled by the REIT.
It is important to be aware of what transfer taxes will affect your transaction in New York. KI Legal’s Transactional attorneys are well versed in these matters and are prepared to help guide you through the process.