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