This section is provided by the New Jersey Department of Treasury, Division of Taxation. The information is current as of July 1, 2001. Further valuable information can be obtained on their website: http://www.state.nj.us.treasury/taxation/.
Affidavit of Consideration
Q: Do I have to have an Affidavit of Consideration if the deed says the transfer is for less than $100?
A: Yes. Chapter 308, Laws of 1991 requires the filing of an Affidavit of Consideration (Form RRF-1) every time an exemption is claimed.
Q: A corrective deed is being recorded to correct the land description. There was an Affidavit of Consideration with the first recording. Do I have to file another RTF-1?
A: Yes, for each recording in which there is a claimed exemption, an Affidavit must be filed.
- What exemption do I use to transfer property from a senior citizen to a trust?
- The senior citizen will maintain control over the property. Once his property is in a trust, when he sells, can he have a senior citizen partial exemption?
- N.J.A.C. 18:16/5.9 says to use “solely to provide or release security for a debt”.
- No. A senior citizen exemption is a personal exemption. A trust is a legal entity not entitled to a partial exemption.
Q: A mother and daughter sell a house they own as tenants in common. The mother is over 62 and lives in the house. Can they receive a partial exemption for the mother’s share of the home?
A: Yes, as long as the ownership is as tenants in common. The consideration is split; the proportionate share owned by the mother qualifies for the senior citizen exemption, while the daughter’s share does not. Joint tenants must all be age 62 or older in order to qualify for the exemption.
Q: The Register of Deeds will not split the fee. What can I do?
A: Pay the realty transfer fee, then file a request for a refund with the Division of Taxation. The Claim for Refund form is called ‘RTF-3’. The law requires that the fee be paid before a deed can be recorded.
Q: Property is being sold by the executor of the estate of someone who was over 62 years old. Is this transaction exempt as the sale by an executor, or can the senior citizen partial exemption is claimed?
A: The transfer of property by an executor to the named devises in a will or to a legal heir in an intestate estate is exempt. The sale of an estate to someone else is not exempt. The senior citizen partial exemption is a personal exemption not given to a decedent or an estate.
Q: My father directed in his will that his property be sold and the money divided between his children. Is such a sale exempt?
A: Yes. As parent to child, this is an exempt transaction.
Q: The family home was bequeathed to two brothers and a sister. One of the brothers wants to but the interest of the other two for $100,000. There is a mortgage with a remaining balance of $21,000 on the property. How is the realty transfer fee calculated?
A: The brother who is buying the interest of the other two owns one-third. The consideration upon which the RTF is calculated is determined by adding two-thirds of the mortgage ($14,000) to the consideration he pays his brother and sister ($100,000), or $114,000.
Parent to Child
Q: A father and mother are selling their home to their daughter and son-in-law. Is this transaction exempt?
A: Yes. As parent to child, this is an exempt transaction.
Q: A father is selling his home to his daughter and her live-in-boyfriend. Is this exempt?
A: One-half of the consideration is exempt as parent to child. The other half is taxable.
Q: We recorded the deed in the wrong county. What can we do?
A: Record the deed in the correct county. The correct county is the one in which the land is located. File an application for a refund with the State (form RTF-3). Also, file an application for a refund of the county portion with the incorrect county
Q: A deed was recorded in Atlantic County for property which was located in Atlantic County and partially in Cape May County. Does Cape May County get any of the RTF?
A: No. Once the full realty transfer fee is collected, the neighboring county cannot charge an additional fee since the rates are set by statutes.
Q: Is there a realty fee on a lease of less than 99 years?
A: No. By definition, a lease of less than 99 years is not a deed for purposes of the realty transfer fee.
Q: Is a Quitclaim Deed exempt?
A: First, make sure it is a true Quitclaim Deed. A Quitclaim Deed conveys only the right, title or interest that the grantor has, or may have, and does not warrant that the grantor has any particular title or legal interest in the property. The deed must say ‘Quitclaim Deed’ with specific language such as “This deed is called a Quitclaim Deed. The Grantor makes no promises as to the ownership of title, but simply transfers whatever interest the Grantor has to the Grantee.” An attorney or title company cannot imply that a deed is a Quitclaim Deed. Attorneys often transfer freehold interest on Quitclaim Deeds. Those transfers are taxable transactions
Q: My client was divorced many years ago. He is deeding his one-half interest in the property to his former wife for $8,000 and an original mortgage of $200,000. Is this transaction exempt as “In specific performance of a final judgment”?
A: No. The mere incorporation of the terms of a separation agreement into a judgment of divorce does not alter the ‘essential consensual character’ of the agreement. Thus for the purposes of the exemption, “In specific performance of a final judgment” may not be used. The only time that this exemption may be used is when the judge orders that the transfer be made in accordance with his orders. The realty transfer fee would be calculated on $8,000 plus one-half of the remaining balance of the mortgage.
In business transactions, the key to the realty transfer fee calculation is the definition of “consideration”. Personal exemptions (senior citizens, blind, disabled) are not granted to legal entitles. Businesses dissolving or liquidating and transferring real estate must pay a RTF on the remaining balance of any mortgages. Partnerships buying the interest of one partner must pay a RTF on the proportionate amount of mortgage balance.
Q: There are tax exempt liquidations for Federal purposes. If someone claims a total exemption based on “351 or 332” liquidation, is the transaction exempt?
A: Section 351 or 332 liquidations are exemptions from Federal income tax which allow a company to transfer all assets and liabilities to a parent company without following the usual rules of adding back depreciation on the disposition of assets. This does not have anything to do with realty transfer fees. N.J.A.C. 18:16-5.10 provides that “(a) In the case of a transfer of real estate to stockholder(s) by a corporation in liquidation, or to partner(s) by a partnership firm in liquidation, no attempt will be made to project value on the basis of consideration passing between grantor and grantee, since such a transaction, in general, represents a return of capital. (b) The transfer is not subject to the transfer fee if there is no other ‘consideration’ as defined in the law. (c) In the event there are no mortgages, liens or other encumbrances on the property, no realty transfer fee will be required to be paid.”
Q: I own the company. Why do I have to pay a realty transfer fee to transfer property to my company based on the remaining balance of the mortgage?
A: A partnership is a distinct legal entity for purposes of transferring property. Additionally, exemption statutes are strictly construed. If there is no applicable listed exemption, realty transfer fee is to be paid.
Sheriff’s Deed, Transfers Prior to Foreclosure
Q: Why do I have to have a Sheriff’s Affidavit of Consideration and a Affidavit of Consideration when a federal agency sells the property?
A: The Sheriff’s Affidavit (RFT-8) is a declaration of other liens or mortgages as required by Chapter 225, Laws of 1979. The Affidavit of Consideration claims the exemption from the fee as required by Chapter 308, Laws of 1991.
Q: My client, the bank, is taking back real estate so that we don’t have to go to a sheriff’s sale. We will eventually cancel the mortgage when we have sold the property and gotten our money back. The register of deeds won’t record the deed without a fee.
A: The Register of Deeds is correct. A realty transfer fee must be paid on the remaining balance of the mortgage if the mortgage is not canceled. You are seeking to protect your investment by taking the property back and avoiding a sheriff’s sale. You are further protecting yourself by holding the mortgage open to maintain a claim against the borrower. The realty transfer laws were not meant to be a guide for business decisions. Unless there is a listed exemption from the realty transfer fee, the fee must be paid.
Q: Is a non-profit organization exempt? Is it exempt from other taxes?
A: No. Unless there is a listed exemption that applies, there are no other exemptions.