Important Amendment to NYS Transfer Tax Law

New York State Tax Law, Section 1402-a, has been amended, effective July 1, 2021, to eliminate the requirement to include the amount paid a Grantee as part of the contract consideration where the Grantee has contractually agreed to pay the Real Estate Transfer Tax on the sale of a 1 - 3 family house (or condominium unit).

You may recall that the Tax Law historically required Transfer Tax, if paid by the Buyer, to be included in calculating the amount of the consideration, resulting in a higher amount of Transfer Tax being payable. By this amendment, in cases where the transfer tax is, by contract, payable by the grantee, beginning July 1st it will no longer be necessary to “gross-up” the consideration by the amount of the Transfer Tax where the property is a 1, 2 or 3 family house.

Also, the person responsible for paying the tax, if on behalf of an entity, may be personally liable to the grantor if the tax is not paid when due. It has been suggested that if the attorney for such a party has agreed to pay the transfer tax, and fails to do so, personal liability may extend to the attorney. Because of this, attorneys who hold Powers of Attorney or other agreements to close for their clients, and pay transfer taxes, etc., should carve out that obligation. 

For further information, see New York State Budget, Section “O”,