Was an agreement assuming mortgage-related duties taxable when the new property owner did not assume personal repayment liability?

Subject

Assumption of Mortgage and Other Loan Documents

Plain-English summary

The assumption agreement was subject to documentary stamp tax on the $3,185,700.03 mortgage amount. Although the buyer did not become personally liable for repayment and the lender agreed to look only to the property, the document made the buyer assume duties and obligations under the mortgage, modification agreement, assignment of rents, and UCC filings.

The Department treated that assumption as a renewal or modification executed by a new obligor, which did not qualify for the identical-obligation renewal exemption.

What this means for you

Avoiding personal deficiency liability did not prevent tax. The assumption of contractual mortgage obligations by a new party was enough under the cited rule.

Common questions

Did the buyer personally assume the loan balance? No.

Why was the document still taxable? It assumed other duties under the mortgage and related loan documents and introduced a new obligor.

What tax base did the ruling use? $3,185,700.03.

Citations and references

• Fla. Stat. §§ 201.08(1), 201.09, and 213.22
• Fla. Admin. Code rr. 12B-4.053(19) and 12B-4.054(1)(g)

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 94B4-008

Original ruling text

Jun 22, 1994

Re: Technical Assistance Advisement No. 94(B)4-008
Documentary Stamp Tax; Assumption of Mortgage and Other
Loan Documents
XXX ("The XXX")
XXX ("XXX")
XXX ("XX")

Dear :

You have petitioned for a Technical Assistance Advisement
pursuant to s. 213.22, F.S., and Florida Administrative Code
Rule 12-11.003.

Issue

Whether the assumption of mortgage and other loan documents
are subject to documentary stamp tax under s. 201.08(1), F.S.

Background

The XXX owns real commercial property that is subject to an
existing mortgage to XXX in the amount of $3,185,700.03. The
Promissory Note ("Note") secured by the mortgage provides that
the holder is not entitled to take any action to obtain any
personal money judgement or deficiency against the maker and the
holder is limited to the security provided by the mortgage with
respect to the Note, except upon any one of four occurrences
which constitute a tort or statutory violation. These consist
of fraud, misrepresentation or misapplication, any act or
omission constituting material waste of the property, and
violations involving hazardous waste. The note and mortgage was
assigned from the original mortgagee to XXX by an assignment of
mortgage and loan documents.

At this time, the XXX wishes to convey the property to XX
subject to the XXX mortgage. The conveyance will be by a
statutory warranty deed and will recite that the conveyance is

subject to the existing XXX mortgage. Tax will be paid on the
transfer based on the purchase price. A purchase money mortgage
for $227,500 will be executed by XX with proper tax paid on the
amount of the mortgage. XXX requests that XX execute a document
assuming the non-monetary obligations imposed. XX will not
become personally obligated for the repayment and XXX agrees to
look only to the security. The non-monetary obligations consist
of those cited above.

Discussion and Law

The tax levied by s. 201.08(1), F.S., is an excise tax on
promissory notes, nonnegotiable notes, written obligations to
pay money made, executed, delivered, sold transferred, or
assigned in Florida and for each renewal of the same. The tax
is also imposed on mortgages, trust deeds, security agreements,
or other evidences of indebtedness filed or recorded in Florida
and on each renewal of the same. Section 201.09, F.S., exempts
the renewal of notes and mortgages that renew the identical
contractual obligation. Rule 12B-4.053(19), F.A.C., provides
that an assumption of a note, mortgage or other written
obligation to pay money effectively renews or modifies the
original obligation and is not exempt from tax. Further, the
rule provides that an assumption of any note and mortgage is
taxable whether incorporated in a conveyance or by a separate
document. In addition, Rule 12B-4.054(1)(g) states that a
renewal is exempt if executed only by the original obligor of
the original note.

The assumption of Mortgage and Other Loan Documents
provides that XX does assume all of the XXX duties and
obligations under the mortgage loan as modified by the
Assumption and First Modification. It further provides that the
obligations assumed by XX shall be pursuant to the mortgage and
mortgage modification agreement, the assignment of rents and the
UCC-1 filings.

Department's Position

Since all notes, mortgages and their renewals are taxable
and as the assumption agreement constitutes a renewal executed

by a new obligor, the assumption document is subject to the
documentary stamp tax at $.35 per hundred based on the amount of
$3,185,700.03.

This response constitutes a Technical Assistance Advisement
under s. 213.22, F.S., which is binding on the Department only
under the facts and circumstances described in the request for
this advice as specified in s. 213.22, F.S. Our response is
predicated on those facts and the specific situation summarized
above. You are advised that subsequent statutory or
administrative rule changes or judicial interpretations of the
statutes or rules upon which this advice is based may subject
similar future transactions to a different treatment than
expressed in this response.

You are further advised that this response and your request
are public records under Chapter 119, F.S., which are subject to
disclosure to the public under the conditions of s. 213.22, F.S.
Your name, address, and any other details which might lead to
identification of the taxpayer must be deleted by the Department
before disclosure. In an effort to protect the confidentiality
of such information, we request you notify the undersigned in
writing within 15 days of any deletions you wish made to the
request or the response.

Sincerely,

James E. Silvey
Tax Law Specialist
Technical Assistance
JES/jes