New York Codes, Rules and Regulations › Title 20 - DEPARTMENT OF TAXATION AND FINANCE › Chapter IV - Sales And Use And Other Miscellaneous Taxes › Subchapter B - Real Estate Transfer Tax › Part 575 - General Provisions › Section 575.5 - Grandfathered conveyances

Current through Register Vol. 46, No. 28, July 10, 2024
Tax Law, §§ 1415, 365(f)(3) of Chapter 61, Laws of
					 1989
(a) A conveyance of real property
				  occurring on or after July 1, 1989 is subject to the tax imposed by section 1402 
				  of the Tax Law and described in section
				  575.2  of this
				  Part unless the conveyance did not involve the delivery of a deed and was made
				  pursuant to a binding written contract entered into on or before February 16,
				  1989. A conveyance of real property occurring on or after July 1, 1989 is
				  subject to the tax imposed by section 1402-a  of the Tax Law and described in
				  section
				  575.3 
				  of this Part unless the conveyance was made pursuant to a binding written
				  contract entered into on or before February 16, 1989. The date of execution of
				  the contract must be confirmed by independent evidence such as the recording of
				  the contract, payment of a deposit or such other facts and circumstances as may
				  be determined by the commissioner.
(b) Where a contract for the conveyance of
				  real property was entered into on or before February 16, 1989, and is later
				  amended, the conveyance is still considered to be made pursuant to a contract
				  entered into on or before February 16, 1989, so long as the amendment to the
				  contract is of a nonsubstantial nature. The determination of what constitutes a
				  nonsubstantial change will be made on a case by case basis. However, any change
				  in the amount of consideration for the real property will be considered a
				  substantial change to the contract and, thus, such conveyance is
				  taxable.
(c) Where the closing date
				  provided for in a grandfathered contract is postponed, with additional payments
				  by the grantee, the conveyance will be considered to be made pursuant to a
				  contract entered into on or before February 16, 1989 if it is shown that the
				  additional payments do not constitute additional consideration. (See section
				  575.1[d][7] 
				  of this Part.)
Example 1:
A, the owner of real property, executed a binding written
					 contract on February 6, 1989 to lease the property with an option to purchase
					 to B for $1,000 a month for ten years. B paid $1,000 as a deposit on the lease
					 on that date. The final closing of the transaction occurred on July 10, 1989.
					 The creation of the lease with the option to purchase is a grandfathered
					 conveyance which is not subject to tax since it did not involve the delivery of
					 a deed, was made pursuant to a binding written contract entered into on or
					 before February 16, 1989, and the date of the execution of the contract was
					 confirmed by independent evidence (payment of the deposit by B).
Example 2:
Same facts as in example 1 except that on March 1, 1989,
					 the contract was amended to provide that B would pay $500 semi-monthly instead
					 of $1,000 monthly. This amendment is considered to be of a nonsubstantial
					 nature and, therefore, the conveyance is still considered to be a grandfathered
					 conveyance not subject to tax.
Example 3:
Same facts as in example 1 except that on June 11, 1989,
					 the contract was amended to provide that B would pay $1,200 each month instead
					 of $1,000. This is a change in the amount of consideration for an interest in
					 the real property. Therefore, the conveyance is subject to tax since it no
					 longer qualifies as a grandfathered conveyance.
Example 4:
On February 1, 1989, D executed a binding written contract
					 to sell his personal residence, a one-family home, to E for $1,200,000. E gave
					 D a check for $10,000 as a deposit on the contract on that date. D conveyed the
					 property to E on July 5, 1989. This conveyance is a grandfathered conveyance
					 for purposes of the additional tax imposed by section 1402-a  of the Tax Law and described in
					 section
					 575.3 
					 of this Part since it was made pursuant to a binding written contract entered
					 into on or before February 16, 1989 and the date of execution of the contract
					 is confirmed by independent evidence (payment of the deposit by E). However,
					 the conveyance remains subject to the transfer tax imposed by section 1402 
					 of the Tax Law and described in section
					 575.2  of this
					 Part.