The rules have changes for realtors, buyers and sellers seeking to transfer ownership of income generating properties. This includes rental properties currently under lease agreements or recently under lease agreements. This does not apply to the sale of an owner-occupied single family home or a sale of real estate in the ordinary course of the seller’s business.
Purchasers must notify the Division of Taxation at least 10 days prior to taking possession of the property. The Division will notify the purchaser within 10 days of receipt if it has a claim against the seller for taxes and the amount of the claim. If the purchaser fails to comply, then the purchaser will be personally liable for any tax owed by the seller to the state.
In order to comply with this requirement and avoid assuming the burden of unpaid taxes the buyer must:
- Contract of Sale. The contract of sale between the parties should include a provision that both seller and purchaser are required to fully comply with the statute. This should include the provision that if there is an unpaid tax burden that funds sufficient to cover this debt be escrowed and the escrowing agent is empowered to release the appropriate funds to the State of New Jersey Division of Taxation.
- Division of Taxation Filings (Seller). The seller must prepare and deliver to the purchaser the Asset Transfer Tax Declaration (Form TTD). The form is available here.
- Division of Taxation Filings (Purchaser). The purchaser must prepare a Notification of Sale, Transfer or Assignment in Bulk (Form C-9600). Available here.
- Submission to the Division of Taxation. The purchaser must then submit Form TTD, Form C-9600, and the fully executed Purchaser Agreement including price, terms and conditions thereof by registered mail to the Director at least ten days prior to the date of closing.
- Director Notification. Within ten days following receipt of the documents, the Director will notify the purchaser/attorney/designee of any possible claim for State taxes and specify the amount to be escrowed by the purchaser at closing.
- Closing and Final Payments. After closing, any and all amounts owed to the State will be paid out of the escrow account (or paid directly to the State).
This applies to all New Jersey real estate sale transactions, other than the sale of the seller’s personal residence.
Anyone who has sold property in the past few years knows the volume of documents required to buy and sell property. This is one more potential pitfall for the buyer. As always it is a good idea to hire legal counsel to assist you with what will likely be the biggest financial investment in your lifetime.