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Title Insurance Services
New York New Jersey Nationwide
140 Mountain Avenue – Suite 101
Springfield, NJ 07081
Tel: 973-921-0990
Fax: 973-921-0902
Date: July 13, 2006
To: All Clients and Friends
From: Cliff Bernstein
Re: Commercial “Mansion Tax” Signed into Law
TITLE INSURANCE BULLETIN – NEW JERSEY
The commercial “Mansion Tax” (A4701 / S1982) amending N.J.S.A. 46:15-7.2 was signed by
Governor Corzine on July 8, 2006. The new law imposes a one percent (1%) fee on the
purchaser of Class 4A commercial property for over $1 Million. Class 4A properties are all
commercial properties other than industrial properties or apartments. Property classes are
defined in the New Jersey Administrative Code at §18:12-2.2, a copy of which is annexed hereto.
The new law applies to transfers of commercial property on or after August 1, 2006, however,
deeds recorded on or before November 15, 2006 under a contract entered into before July 1,
2006 will get special treatment. While the 1% fee must still be paid upon recording, the fee will
be refunded upon submission of a proper claim to the Division of Taxation.
The law also applies to non-deed transfers of a controlling interest (over 50%) in an entity that
owns Class 4A property where the total consideration for transfer is in excess of $1 million. This
provision is intended to prevent the avoidance of the new transfer tax by a sale of a company
owning Class 4A property rather than a sale of the property itself.
The New Jersey Division of Taxation will be issuing an amended RTF-1EE Affidavit of
Consideration form reflecting the change to include Class 4A commercial property together with
Class 2 Residential, Class 3A Farm property and Class 4C Cooperative apartment transfers for
over $1 million as requiring the additional 1% fee. You are reminded that every deed for over $1
million regardless of property class must be accompanied by a completed RTF-1EE form.
Copies of both A4701 and S1982 are available at: http://www.njleg.state.nj.us/ .
This bulletin is sent courtesy of CB Title Group, LLC and Stewart Title Guaranty Company
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N.J.A.C. §18:12-2.2. Property classification with definitions
(a) Class 1: “Vacant Land” means land itself above and under water in its original,
indestructible, immobile state. Vacant land is idle land, not actively used for agricultural
or any other purpose; unused acreage; and is land in an approved subdivision actively
on the market for sale or being held for sale.
(b) Class 2: “Residential” means property described generally as a dwelling house including
the lot or parcel of land on which the dwelling house is situated. The dwelling is
functionally designed for use and enjoyment by not more that four families. This class
includes residential condominiums. A dwelling functionally designed for use and
enjoyment by more than four families should be designated Class 4C.
(c) Class 3A: “Farm property (Regular)” means land being used for agricultural or
horticultural purposes, including its use for the breeding, pasturing and production of
livestock and animal products. Farm property also includes land, together with
improvements, where the use of the land and function of the buildings thereon are for
agricultural or horticultural purposes, as well as farm houses and the lots or parcels of
land on which they are situated. For definitions of agricultural use and horticultural
use, see N.J.A.C. 18:15-1.1, adopted under the “Farmland Assessment Act of 1964”,
N.J.S.A. 54:4-23.1 et seq.
(d) Class 3B: “Farm property (Qualified)” means land which has qualified and is assessed
under the Farmland Assessment Act, P.L. 1964, c. 48.
(e) Class 4A: “Commercial properties” means any other type of income-producing property
other than property in classes 1, 2, 3A, 3B and those properties included in classes 4B
and 4C below.
(f) Class 4B: “Industrial properties” means land or land and improvements adaptable for
industrial use; ideally, a combination of land, improvements, and machinery which has
been integrated into a functioning unit intended for the assembling, processing, and
manufacturing of finished or partially finished products from raw materials or fabricated
parts, such as factories; or a similar combination intended for rendering service, such as
laundries, dry cleaners or storage warehouses.
(g) Class 4C: “Apartments” designed for the use and enjoyment of five families or more.
This class includes residential co-operatives and mutual housing corporations.
