Closing questions
Who pays transfer tax on a sponsor sale?
Sponsor sales usually shift the state and city transfer taxes to the purchaser, and the amount is grossed up. How the offering plan controls the allocation.
Who pays transfer tax on a sponsor sale?
Quick Answer
Ordinarily the grantor pays the New York State transfer tax and the New York City real property transfer tax. Sponsor sales invert that by contract. The offering plan and the sponsor’s form of contract place both taxes on the purchaser, along with the sponsor’s attorney fee in many plans, and the terms are rarely negotiable.
The gross-up follows from how consideration is measured. When a purchaser pays a tax that is legally the seller’s obligation, that payment counts as part of what the seller received, so the taxable consideration rises and the tax computed on it rises with it. The forms handle the arithmetic, but the result surprises purchasers who budgeted for the base figure.
This sits on a buyer side that already carries the mansion tax on qualifying residential purchases and, on a condominium, mortgage recording tax on a financed deal. Stacking those charges is the reason a sponsor unit that looks priced in line with resales can settle out well above one.
The fix is arithmetic done early. Ask the sponsor’s counsel for a closing cost estimate that shows every buyer-side line, then compare the all-in figure against a resale in the same building rather than comparing asking prices. That comparison, done before the contract, is the point at which the allocation still has any negotiating value.
Is the transfer tax gross-up negotiable on a sponsor sale?
Rarely on the allocation itself, because the plan sets it and the sponsor applies the same terms across the building. What is sometimes negotiable is price, a work credit, or the sponsor’s attorney fee. Treat the tax allocation as a fixed cost of that unit and negotiate the number that can actually move.
Do sponsor transfer taxes apply to condo units too?
Yes. A sponsor selling new development or unsold condominium units commonly shifts the state and city transfer taxes to the purchaser in the same way, and the same gross-up applies. On a condominium the purchaser is also facing mortgage recording tax on a financed deal, so the buyer side is heavier still.
What else should you read before closing?
In the glossary
- Transfer tax (RPTT and NYS)Taxes on the conveyance itself, one City and one State. Rates step up at higher prices, and who pays is set by custom and then confirmed by the con...
- Mansion taxA New York State tax paid by the buyer on residential conveyances of one million dollars or more, graduated upward through a series of higher price...
- Mortgage recording taxThe New York tax due when a mortgage is recorded, computed on the new money secured. On a building with six or fewer apartments the lender pays 0.2...
- Offering planThe sponsor's filed disclosure document for a co-op or condominium, carrying its budget, share or common interest allocation, building rules and sp...
- Closing statementThe itemized accounting of every credit, debit and disbursement at a closing. Commercial deals use a HUD-1 or ALTA settlement statement; consumer m...
Questions this raises
- What are HDFC co-op income caps?HDFC co-ops cap purchaser household income under the Private Housing Finance Law, against an area median income ceiling. How the cap is measured an...
- Can you resell an HDFC co-op at market price?HDFC resale is limited by the building’s own documents: a purchaser income cap, a flip tax to the corporation and, where one exists, a resale price...
- What is the risk in a land lease co-op?A land lease co-op rents the ground under the building. Rent resets can raise maintenance sharply and the lease end date limits financing and resal...
- What is a sponsor unit in a co-op?A sponsor unit is an unsold apartment still held by the converter. How the offering plan changes board approval, transfer taxes and the condition o...
- Do sponsor units skip board approval?Sponsor sales of unsold co-op shares usually avoid board consent under the offering plan. What the purchaser still files, and what the board still ...
- Who pays the flip tax in a New York co-op sale?A flip tax usually comes off the seller’s proceeds, but plenty of New York buildings shift it to the purchaser. Why the rider has to name the payin...
Building types
- Sponsor co-op unitAn unsold share allocation still held by the building’s original sponsor, sold under the offering plan rather than through the ordinary board process.
- New-development condoA first sale from the sponsor of a newly built condominium, governed by an offering plan, often delivered on a temporary certificate of occupancy.
- Sponsor resale condo unitAn unsold condominium unit the sponsor still owns years after the building opened, sold under the original offering plan rather than as an ordinary...
The statute itself
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