We took out one mortgage covering both our existing condo and an adjacent unit we bought to combine into a single home. Does the NYC mortgage recording tax apply at the higher commercial-property rate because the mortgage covers two separate condo units?

Plain-English summary

A married couple owned and lived in a NYC condominium unit (Unit C). When the adjacent unit (Unit B) came up for sale, they bought it specifically to combine the two into a single primary residence — but the condominium's governing documents didn't let them make any alterations to Unit B before closing. Over several months, they lined up architect and contractor plans, got Condominium Board approval (with a required 30-day start / 120-day completion construction window), and closed on Unit B in December 2012. Their lender recommended spreading their financing across both units at closing, so the couple's existing $880,000 mortgage on Unit C and their new $704,000 financing for Unit B were consolidated into a single $1,584,000 mortgage secured by both units. At recording, they paid NYC mortgage recording tax at the highest commercial rate (2.8% combined state/city), and asked whether the lower residential rate (2.175%) should have applied instead.

NYC's MRT (authorized by Tax Law § 253-a, implemented in NYC Admin. Code § 11-2601.d) taxes "individual residential condominium units" securing $500,000+ debt at a lower rate than other real property. Since the mortgage covered two still-separate condo units rather than one, the city initially assessed the higher rate.

The Department drew an analogy to the similar NYC Real Property Transfer Tax (RPTT), which uses the same kind of use/consideration-based rate tiers and has a body of case law on when multiple adjacent units sold together are (or aren't) treated as a single residential unit for rate purposes — turning on the buyer's clear, evidenced intent to combine the units into one residence. Based on the couple's extensive pre-closing preparation (architectural plans completed before closing, formal Board approval process, firm construction deadlines, and prompt actual completion of the combination), the Department concluded their circumstances showed the same kind of clear combination intent recognized in the RPTT bulk-sale cases — so the lower residential MRT rate applies to their mortgage, not the higher rate.

What this means for you

Homebuyers combining adjacent condo or co-op units

Document your combination intent thoroughly and BEFORE closing — architectural plans, contractor estimates, and any condominium board approvals or agreements obtained prior to the closing date are exactly the kind of evidence the Department looks to in applying the lower residential mortgage recording tax rate to a mortgage spanning multiple not-yet-combined units.

Mortgage lenders and closing attorneys handling unit-combination purchases

Don't assume a mortgage covering two legally separate condo units automatically gets the higher commercial rate. If the borrower has clear, documented pre-closing intent to combine the units into a single residence, argue for the residential rate by analogy to this ruling and its RPTT bulk-sale precedents.

Tax professionals researching MRT rate disputes

This opinion imports the NYC Real Property Transfer Tax "clear intent to combine" bulk-sale case law (Cambridge Leasing, Rosenblum, Gruber) directly into the mortgage recording tax context — a useful analogy since NYC MRT and RPTT share structurally similar use-based rate tiers.

Common questions

Q: Does simply intending to combine units someday qualify for the lower rate?
A: Not on vague intent alone — the Department relied on concrete, documented, PRE-CLOSING steps (completed architectural plans, formal board approval process, defined construction deadlines) as evidence of clear intent.

Q: What happens if the combination never actually happens?
A: This ruling doesn't address that scenario directly, but the underlying RPTT case law and the logic of the "clear intent" test suggest that failing to follow through could undermine the residential-rate treatment; consult a tax professional before relying on planned-but-uncompleted combinations.

Q: Does this rule apply outside New York City?
A: This ruling addresses the NYC mortgage recording tax specifically (Tax Law § 253-a and NYC Admin. Code § 11-2601.d); other localities' mortgage recording tax rate structures may differ.

Q: Can I rely on this ruling for my own unit-combination purchase?
A: No. This advisory opinion binds the Department only as to the petitioner and the specific facts described.

Citations and references

Statutes and regulations:

• Tax Law § 253 (state mortgage recording tax; flat rate, doesn't vary by property use)
• Tax Law § 253-a (authorizes NYC mortgage recording tax)
• NYC Administrative Code § 11-2601.d (NYC MRT rate tiers: under $500K, 1-3 family/condo units $500K+, all other property)
• 20 NYCRR § 642.4(a)(2)(ii) (residential-rate regulation; property nature determined as of mortgage execution date)

RPTT case law cited by analogy:

• In the Matter of David Gruber, TAT(E) 2003-7/8/9 (RP), Sept. 12, 2006
• NYC Finance Memorandum 00-6 (June 2, 2000) and 00-6REV (Sept. 8, 2011)
• NYC Finance letter ruling, September 2, 2008

Related opinions

• TSB-A-14(1)R — a later opinion applying this same "clear intent to combine" test to a purchase money mortgage covering THREE adjacent condominium units.

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/mortgage_rec_ao_2013.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/mortgage/a13_3r.pdf

Original ruling text

New York State Department of Taxation and Finance

Office of Counsel
Advisory Opinion Unit

TSB-A-13(3)R
Mortgage Recording Tax
July 15, 2013

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. M121119A

The Department of Taxation and Finance received a Petition for Advisory Opinion from
name and address redacted.
Petitioners recently purchased an individual residential
condominium unit, which was adjacent to their present condominium residential unit, for the
purpose of combining the units into a single-family residence. Petitioners ask whether the
mortgage recording tax due upon the recording, prior to the units being combined, of a mortgage
secured by both condominium units, each securing a principal debt of $500,000 or more, will be
subject to the combined New York State (NYS) and New York City (NYC) mortgage recording
tax (MRT) at the highest rate of 2.8% instead of a residential rate of 2.175%.
We conclude that the applicable combined tax rate for the recording of the mortgage
described above is 2.175%.
Facts
Petitioners own and reside in an individual residential condominium unit (unit C) in
NYC, which they bought in 2008 from the Corporation Sponsor. When the adjacent
condominium (unit B) went up for sale by a private party, Petitioners wanted to buy it for the
purpose of combining the two condominiums into their primary residence. Although the
Condominium’s governing documents permitted building alterations for the purpose of
combining units, they did not permit a unit owner to make any alterations, additions, or
improvements to any areas within the condominium building that were not specifically owned by
that condominium unit owner. Thus, Petitioners could not make any alterations, additions, or
improvements to unit B prior to their closing.
Throughout the fall of 2012, Petitioners consulted with representatives of the
Condominium’s Board of Managers, various architects and contractors, and the New York City
Department of Buildings to ascertain whether a construction project to combine the units would
be approved. Architectural plans for the combination were completed on November 7, 2012.
An Apartment Alteration Agreement was submitted by the Petitioners to the Property
Management agent requesting consent of the Condominium to the construction. It included
requirements that Petitioners commence construction within 30 days of executing the Agreement
with the Board and complete construction with 120 days of commencement. Petitioners closed
on the purchase of unit B on December 12, 2012. They received formal written notice of
approval for the project by the Condominium Board on January 16, 2013. A work permit was
issued by the NYC Department of Buildings the same day. Work began on the combination on
January 18, 2013 and was completed on February 11, 2013.

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TSB-A-13(3)R
Mortgage Recording Tax
July 15, 2013

Prior to Petitioner’s acquisition of unit B, unit C was subject to a mortgage securing debt
in the amount of $880,000.1 On December 12, 2012, Petitioners purchased unit B for which they
were approved for new funds in the amount of $704,000. When Petitioners advised their lender
of their intent to combine the two units into one residence, the lender recommended that
Petitioners spread the mortgage at closing across both units. Thus at closing, the two mortgages
were consolidated into a new mortgage in the amount of $1,584,000 secured by both units C and
B. Upon the recording, the Petitioners paid NYC MRT at the highest rate.
Applicable Statutes and Regulations
NYS imposes a MRT on the recording of a mortgage securing real property located in
NYC at the rate of $1.05 for each $100 and each remaining fraction thereof of principal debt or
obligation secured at the date of execution or at any time thereafter. See Tax Law section 253.
This rate does not vary according to the use of the real estate or the amount of the mortgage debt.
NYC is authorized to impose a City MRT under Tax Law section 253-a, and it has done
so under the New York City Administrative Code (the Code) section 11-2601.d. Unlike the Tax
Law, the Code provides for different rates, depending on the use of the property mortgaged and
the amount of debt secured:
d. With respect to: (1) real property securing a principal debt or obligation of
less than five hundred thousand dollars, a tax of one dollar, (2) with respect
to one, two or three-family houses and individual residential
condominium units securing a principal debt or obligation of five hundred
thousand dollars or more, a tax of one dollar and twelve and one-half cents,
and (3) with respect to all other real property, a tax of one dollar and seventyfive cents, for each one hundred dollars and each remaining major fraction
thereof of principal debt or obligation which is, or under any contingency
may be secured at the date of execution thereof, or at anytime thereafter by a
mortgage on such real property situated within the city and recorded on or
after August first, nineteen hundred ninety, is hereby imposed on each such
mortgage and shall be collected and paid as provided in this chapter. If the
principal debt or obligation which is or by any contingency may be secured
by such mortgage is less than one hundred dollars, a tax of one dollar is
hereby imposed on such mortgage and shall be collected and paid as
provided in this chapter.
A regulation, 20 NYCRR §642.4(a)(2)(ii) adopted in 1994, explains §11-2601 of the
Code, but its words are slightly different from those in the Code.2
Where the amount of such principal debt or obligation is $500,000 or more
and the mortgage is of real property consisting only of a one-, two- or three1

When Petitioners closed on unit C, that property secured a mortgage in the amount of $920,000. Immediately prior
to closing on the adjacent unit B on 12/12/12, that mortgage on unit C had been paid down to $880,000.
2
These words track with words in Tax Law §1402 imposing the real estate transfer tax (RETT).

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TSB-A-13(3)R
Mortgage Recording Tax
July 15, 2013

family house or an individual residential condominium unit, the rate of
tax is one dollar and 12 ½ cents. For purposes of determining whether the
mortgage is of real property consisting only of a one-, two- or three family
house or an individual residential condominium unit, the nature of the
property as of the date that the mortgage is executed must be used.
Analysis
In this case, with respect to “individual residential condominium units”, the Code
specifics that the NYC MRT is imposed at a rate of $1.125 for each $100 of principal debt and
remaining fraction thereof securing a principal debt or obligation of $500,000 and each
remaining fraction thereof. If, at the closing, only unit B had been named on the mortgage
securing the new purchase money, the appropriate MRT rate would clearly be the lower rate
applicable to one, two or three-family houses and individual residential condominium units.
Here, though, Petitioner executed a new mortgage that spread the combined debt to both units.
Because this mortgage covered two condominium units that were not already combined into one
residence, the City assessed the MRT at the highest rate.
Similar aggregation issues have arisen with regard to assessments of the NYC Real
Property Transfer Tax (RPTT), which is similar to the NYC MRT in that the rates are imposed
according to the amount of consideration and the type of use. See Code section 11-2101.a(9).
In 2000, NYC Finance took the position that a transfer of adjacent cooperative apartments or
residential condominium units which had been combined into a single residence would not be
considered a “bulk sale” if the facts and circumstances indicate that the units have been
physically combined.3 NYC Finance updated this guidance in 2011, reaffirming that an analysis
of specific facts and circumstances is necessary to determine whether a transfer constitutes a bulk
sale subject to the higher commercial RPTT rate.4
In 2006, the NYC Tax Appeals Tribunal sustained the cancellation of NYC Finance
notices assessing the RPTT at the higher commercial rate on a transfer of three contiguous
residential condominium units to a single buyer where the record clearly reflected the buyer’s
intention to combine the three units into one residential space.5 NYC Finance reached a similar
conclusion in a letter dated September 2, 2008, opining that the conveyance of two adjoining
apartments from a development corporation would be subject to the lower RPTT rate applicable
to a single residential apartment, because the buyer intended to combine them immediately after
obtaining title to his primary residence. The buyer had requested that the units be combined
prior to closing, but the Corporation Sponsor refused, citing additional costs and expenses that
would be incurred. As evidence of the buyer’s intent to combine the units, he submitted invoices
and checks totaling over $6,000 to a firm providing the design and architectural drawings
necessary for the construction. The letter noted that “...when the facts are particularly clear with
3

NYC Finance Memorandum 00-6 (June 2, 2000).
NYC Finance Memorandum 00-6REV (September 8, 2011).
5
In the Matter of David Gruber, TAT (E) 2003-7 (RP), TAT (E) 2003-8 (RP), TAT (E) 2003-9 (RP), Sept. 12,
2006.
4

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TSB-A-13(3)R
Mortgage Recording Tax
July 15, 2013

regard to the intent to combine apartments, we will treat the units as a single apartment for
purposes of calculating the RPTT.”
Analogizing these RPTT matters to assessments under the NYC MRT, we conclude that
Petitioners’ facts and circumstances, as stated in the Petition, evince Petitioners’ clear intent to
combine the two adjacent units into one primary residence. We further conclude that, under
these facts and circumstances, the NYC MRT rate imposed on the recording of Petitioners’
mortgage executed at the closing on unit B is the rate applicable to one, two or three-family
houses and individual residential condominium units securing a principal debt or obligation of
five hundred thousand dollars or more.

DATED: July 15, 2013

NOTE:

/S/
DEBORAH R. LIEBMAN
Deputy Counsel

An Advisory Opinion is issued at the request of a person or entity. It is limited to the
facts set forth therein and is binding on the Department only with respect to the
person or entity to whom it is issued and only if the person or entity fully and
accurately describes all relevant facts. An Advisory Opinion is based on the law,
regulations, and Department policies in effect as of the date the Opinion is issued or
for the specific time period at issue in the Opinion. The information provided in this
document does not cover every situation and is not intended to replace the law or
change its meaning.