N.Y. Comp. Codes R. & Regs. tit. 20 § 575.5

Current through Register Vol. 46, No. 45, November 2, 2024

Section 575.5 - Grandfathered conveyances

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.

N.Y. Comp. Codes R. & Regs. Tit. 20 § 575.5