USA – NEW YORK Law and Practice Contributed by: Lindsey Haubenreich, Joseph Heins, Timothy Moriarty, Kimberly Nason and Matthew Fitzgerald, Phillips Lytle LLP
2.10 Taxes Applicable to a Transaction For the transfer of real estate, a transfer tax is due to the New York State Department of Taxation and Finance, and is paid to the applicable county clerk upon recordation of a deed. In order to record a deed, a transfer tax return (form TP-584) must be presented to the county clerk. The state transfer tax is USD2 for every USD500 of either consideration paid or the fair market value of the real property. Local municipalities may also impose a separate transfer tax, which varies by county. Transfer tax and the cost of filing a form TP-584 are customarily seller expenses, although this can be negotiated. In addition, “Mansion Tax” is imposed on the conveyance of residential real property where the consideration is USD1 million or more, at a tax rate of 1% of the consideration paid, and is customarily paid by the purchaser. Transfers of real property in New York City may be subject to additional taxes. A transaction of shares in a property-owning company also triggers a transfer tax obligation if the grantee, or a group of grantees acting in concert, acquires a controlling interest (50% or greater) from one or more grantors. There are certain standard exemptions, including con - veyances: • to the federal or state government, or their agen - cies or political subdivisions; • to secure a debt or other obligation; • to confirm, correct, modify or supplement a prior conveyance; • made as gifts; • that are only intended as a change of identity; • given in connection with a tax sale; • by deed of partition; • made pursuant to the federal Bankruptcy Act; • that only consist of certain contracts to sell – or options to purchase – real property; or • not deemed a conveyance within the meaning of New York tax law. 2.11 Legal Restrictions on Foreign Investors Regulations issued since the passage of the Foreign Investment Risk Review Modernization Act of 2018
include acts of God or war, acts of third parties, and landowner liability protections, such as the innocent landowner defence, bona fide prospective purchaser defence, and contiguous property owner defence. If the buyer spends money to clean up the contamina - tion caused by others, there are contribution claims available under state and federal laws. 2.8 Permitted Uses of Real Estate Under Zoning or Planning Law A buyer can ascertain the permitted uses of a parcel of real estate by undertaking an analysis of the appli - cable zoning map and code to identify the zoning dis - trict of the parcel in question and the uses permitted by right in that district, as well as the uses permitted upon the issuance of a special use permit. In addition, a buyer should review the applicable zoning code to determine the associated bulk requirements. Further background is often available in a municipality’s land use/comprehensive plan. 2.9 Condemnation, Expropriation or Compulsory Purchase Governmental taking through eminent domain or con - demnation is a possible risk in this jurisdiction. While there is only a slight risk that a governmental taking will occur, it appears more prevalent along rights of way to accommodate roadway-widening projects or the installation of public utilities. The governmental taking process in New York State is codified in the New York Eminent Domain Procedure Law, and allows for condemnation by the filing of an appropriate map with the applicable county clerk (at which time the property set forth in the map vests in the governmental agency) or the filing of a petition to condemn, which seeks an order allowing the filing of an acquisition map. The title vests in the condemning party upon the filing of the acquisition map. The condemning party is required to pay just compen - sation (defined as the fair market value of the property) to the former owner of the property that was acquired through condemnation.
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