The “Mansion Tax”

Over the last couple of years, the real estate closing has become more expensive and more burdensome thanks to the “Mansion Tax” and the filing requirements that go along with it.
The Mansion Tax requires Buyers to pay a tax equal to 1% of the purchase price over $1,000,000.00. This became effective in July 2004 and initially applied to all property utilized or zoned residential only. Then in January 2005, it was amended to exempt vacant land. The Mansion Tax was amended once again in July 2006 to include Class 4A commercial property (incomeproducing real property).

The required forms have also changed. The Affidavit of Consideration was once utilized only by the Seller in the following instances: (a) New construction; (b) Senior citizen/blind person/disabled person; (c) Low and Moderate Income Housing; and (d) Full exemption from the realty transfer fee in seventeen (17) specified circumstances. Now there is both a Seller’s Affidavit of Consideration (RTF-1) and a Buyer’s Affidavit of Consideration (RTF-1EE). The latest revisions to the forms were made in August 2006. The new form requires that the County Municipal Code and Municipality of Property Location be completed. And, when dealing with Class 4A commercial property, a calculation of the equalized assessed valuation of the property must be completed and included.

Bergen County takes this all a step further. It now requires that a Seller’s Affidavit of Consideration, in duplicate, be submitted with every Deed sent in for recording whether the type of property or amount of consideration makes the Mansion Tax applicable or not. In addition, in Paragraph 1 which identifies the address and town of the property, it is required that “Class 2 – Residential” be added to that line if the property is residential. Oh, and one more thing, every check for a realty transfer fee in excess of $10,000.00 must be certified.

Linda M. Herlihy is an Associate at WJ&L who practices in our Land Use and Real Estate areas.

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