What documentary stamp tax applied when a developer assigned an unencumbered lease to a condominium association for no consideration?

Subject

Assignment of Lease

Plain-English summary

The proposed lease assignment required only Florida's minimum $0.70 documentary stamp tax. The developer planned to assign its remaining leasehold interest to the condominium owners' association while liquidating, and neither party would give or receive consideration.

Although assignments of leasehold interests are generally taxable based on consideration, the Department applied the rule for an unencumbered conveyance with no consideration. No leasehold mortgage encumbered the interest, so there was no larger tax base.

What this means for you

An assignment labeled as a no-cost transfer still needs to be checked for assumed obligations, mortgages, or other encumbrances because those items can count as consideration. On the facts presented here, their absence limited the tax to the statutory minimum.

Common questions

Was the assignment completely tax-free? No. The Department required the minimum $0.70 documentary stamp tax.

Why was no larger tax due? The association gave no consideration, and no leasehold mortgage encumbered the transferred interest.

Would an encumbered lease produce the same result? The advisement did not say so. Its conclusion depended expressly on the leasehold being unencumbered and transferred without consideration.

Citations and references

• Fla. Stat. § 201.02(1)
• Fla. Admin. Code rr. 12B-4.013(27) and 12B-4.014(2)
• Fla. Stat. § 213.22

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 94B4-024

Original ruling text

Dec 27, 1994

Re: Technical Assistance Advisement No. 94(B)4-024 Documentary Stamp Tax; Assignment of Lease XXX (Developer) XXX (Association) XXX (Development Company)

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 an assignment of a lease from a developer to a condominium owner's association for no consideration is subject to tax under s. 201.02, F.S.

Background

By lease dated 1979 and recorded in County Official Records, Development Company leased from the County XX Administration, lots on the beach, First Addition (the "Lease"). Development Company subsequently assigned its interest in the Lease to Developer pursuant to Assignment of Lease dated 1983, and recorded in County Official Records.

Developer developed upon the subject property a condominium project. Only a portion of the lots were submitted to condominium use and ownership pursuant to the condominium documents. All but one of the individual condominium units have now been sold. The rental payments required under the Lease are made by the Association which in turn is reimbursed by each of the individual condominium unit owners. Developer does not charge and has not in the past charged any additional rent to either the individual unit owners or the Association. Pursuant to First Amendment to Restated and Amended Lease Agreement dated

1994 and recorded in County Official Records, Developer and the Board of County Commissioners, as successor-in-interest to the County XX Administration, amended said Lease so as to cause the description of the land covered thereby to conform to the description of the land submitted to condominium use and ownership pursuant to the condominium documents.

Developer proposes to liquidate its assets and dissolve. In connection therewith, it desires to assign to the Association any interest it may have in the Lease. Under the proposed transaction, the Association would pay, and Developer would receive, no consideration for the assignment.

Your position is that only the minimum documentary stamp tax would be required as there is no consideration given in exchange for the transfer.

Discussion and Law

The tax levied by s. 201.02(1), F.S., is an excise tax on deeds, instruments, or writings transferring any interest in real property. The tax shall be 70 cents per each $100 of consideration. For purposes of this section, consideration includes money paid or to be paid, the discharge of any obligation, the amount of any mortgage, purchased money mortgage, or other encumbrance. If the consideration is other than money, the consideration shall be presumed to be the fair market value of the real property being transferred.

Rule 12B-4.013(27), F.A.C., provides that all assignments of leases or other conveyances of leasehold interest in real property are taxable based on the consideration paid or to be paid. In addition, Rule 12B-4.014(2), F.A.C., provides that a conveyance of unencumbered property with no consideration is not taxable.

Department's Position

As the condominium owner's association is giving no consideration for the transfer and there is no leasehold mortgage encumbering the leasehold interest, the assignment of

the lease will require only the minimum $.70 documentary stamp tax pursuant to Rule 12B-4.014(2), F.A.C.

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