Changes to Liability Provisions for New York Land Transfer Tax

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Boutique law firm based in New YorkPardalis & Nohavicka brings the latest legal updates to the real estate world. Pardalis & Nohavika manages an eclectic array of cases, representing individuals and business owners in civil litigation, criminal matters and business transactions, currently litigating and representing clients in the United States and around the world.

Earlier this spring, New York Governor Andrew Cuomo signed the Fiscal Year 2022 Budget Bill, which included two notable changes to the liability provisions for the state’s real estate transfer tax obligations. from New York.

What is the tax on real estate transfers?

New York State imposes a Land Transfer Tax (RETT) on the transfer of real estate when the consideration exceeds $ 500. This transfer tax is usually imposed on the settlor (seller) in a standard real estate transaction. However, in the event that the licensor does not pay the tax, then the liability is transferred to the concessionaire (buyer). Conversely, in the event that council tax – a tax imposed on a buyer for a building greater than $ 1 million – is not paid by said buyer at closing, this responsibility passes to the seller.

Although seemingly contradictory, these two scenarios are true. In real estate transactions, the payment of all related taxes is the joint responsibility of the seller and the buyer, and this is what has been radically changed in the new bill.

Amendments to Liability Provisions

First, the finance bill extends the payment obligations to individuals of an entity. From now on, any officer, employee, manager or member of an entity (company, partnership, sole proprietorship or LLC) must comply with the provisions relating to transfer rights and can now be held personally liable for transfer rights.

This is a major change because, generally, the purpose of buying property under an entity is to maintain debts only to the entity – and not to individual interest holders.

Second, the budget bill also added language to clarify that while the grantor and the concessionaire are jointly responsible for the transfer tax, the responsibility rests with the grantor. “Not to be payable, directly or indirectly, by the beneficiary” (SB S2509C, Pt. O, §2) is the specific language used to clarify this misconception.

Thus, in the event that the grantor does not pay the transfer tax and the cost falls on the concessionaire, the buyer now has a recourse to recover from the seller the amount that the buyer had to pay.

Therefore, this provides additional protection for the buyer, thus ensuring that he can recover the taxes paid from the party initially liable (the seller) if the buyer is hit by the transfer duty invoice.

The provisions of the new finance bill apply to all transfers of real estate made from July 1, 2021.

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Real Estate Lawyer and Corporate TransactionsNathalie Goldsteingraduated from Cardozo School of Law, where she served as President of the Real Estate Law Association. She has experience in residential and commercial real estate transactions and takes pride in guiding her clients through every step of their transaction, whether it’s a first-time buyer or a franchise business.

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