Bulletin: NJ000112

 Dear Associates:

The commercial "Mansion Tax" (A4701 / S1982) amending N.J.S.A. 46:15-7.2 was signed by Governor Corzine on July 8, 2006.  The new law imposes a one percent (1%) fee on the purchaser of Class 4A commercial property for over $1 Million.  Class 4A properties are all commercial properties other than industrial properties or apartments.   Property classes are defined in the New Jersey Administrative Code at §18:12-2.2.

The new law applies to transfers of commercial property on or after August 1, 2006, however,   deeds recorded on or before November 15, 2006 under a contract entered into before July 1, 2006 will get special treatment.  While the 1% fee must still be paid upon recording, the fee will be refunded upon submission of a proper claim to the Division of Taxation.

The law also applies to non-deed transfers of a controlling interest (over 50%) in an entity that owns Class 4A property where the total consideration for transfer is in excess of $1 million.  This provision is intended to prevent the avoidance of the new transfer tax by a sale of a company owning Class 4A property rather than a sale of the property itself.

The New Jersey Division of Taxation will be issuing an amended RTF-1EE Affidavit of Consideration form reflecting the change to include Class 4A commercial property together with Class 2 Residential, Class 3A Farm property and Class 4C Cooperative apartment transfers for over $1 million as requiring the additional 1% fee.  Associates are reminded that every deed for over $1 million regardless of property class must be accompanied by a completed RTF-1EE form.

Copies of both A4701 and S1982 are available at:  http://www.njleg.state.nj.us . Copy and distribute this bulletin to your escrow officers, title examiners, title officers, searchers and anyone else that you feel should know about it.