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Legal Research Library   >   Mortgage Recording Tax Credit...

Mortgage Recording Tax Credit for Purchase Money Mortgages Recorded in Connection with First Sales of Condominium Units
By Glen Chernick, Branch Counsel, Nassau/Queens

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This article Pursuant to Article 11 of the Tax Law of the State of New York a tax is imposed on the recording of a mortgage in New York State with certain exceptions. While the making of a mortgage in itself is not taxable, the recording of the mortgage is. The mortgage recording tax is determined by applying a tax rate ranging from .75% to 2.75% to the principal debt or obligation secured by or to be secured under any contingency in the mortgage. In New York City the tax rate ranges from 2% to 2.75% depending on the amount of the principal debt or obligation secured and the type of property encumbered. Recording refers to the filing and indexing of the mortgage in the various county clerk's offices or in a county having a register, the Register's office. The recording of mortgages is critical to achieve lien priority and enforceability as an unrecorded mortgage simply can not be foreclosed. The definition of the mortgage is very broad and includes "every mortgage or deed of trust which imposes a lien on or affects title to real property" (NY Tax Law S25.2). The regulations in the Codes Rules and Regulations of the State of New York Title 20 Taxation and Finance Volume D subchapter N provide further amplification of the definition and should be considered.

This article will focus on a credit afforded to first purchases of condominium units against the mortgage recording taxes payable on their purchase money mortgages, pursuant tap Real Property Law S.3390-ee2. The amount of credit is determined by multiplying the basic law tax and, where applicable, the additional tax, the City of New York tax, the City of Yonkers tax and the Broome County tax paid upon the recording of a construction or blanket mortgage, by the purchaser's pro rata percentage interest in the common elements of the condominium. One of the components of the mortgage recording tax in all counties in New York state is a 14% Special Additional tax for which there is no credit available under S.339-ee2. Recently we have seen a number condominium conversions where this credit has been utilized to reduce the amount of mortgage recording taxes paid on purchase money mortgages.
For mortgages recorded prior to July 1, 1989, the credit is available against mortgage recording taxes paid in connection with construction mortgages used to construct the condominium unit and blanket mortgages affecting the condominium unit at the time the purchase money mortgage is recorded. This allows a credit against any mortgage recording tax paid for all qualifying mortgages.

The amendment provides:

1. In the case of a construction mortgage recorded on or after July 1, 1989, the credit is allowed where mortgage recording taxes were paid on such mortgage and its proceeds were applied to the construction of a condominium for which the credit is applied for.
2. In the case of a blanket mortgage recorded on or after July 1,1989 on which the mortgage recording tax was duly paid, the credit is allowed where the proceeds of such mortgage applied exclusively to:
   1. The payment of a construction mortgage whose proceeds were applied in the manner described in paragraph 1 above or
   2. To capital expenditures or expenses for the development or operation of the condominium, or
   3. To the purchase of land or buildings for the condominium, provided that such purchase occ

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