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Beginning October 1, 2019, only the latest version of the FP-7/C (marked as revised 8/2019) may be submitted to the Recorder of Deeds. All prior versions of the FP-7/C will be obsolete as of October 1, 2019, and will not be accepted.
Revisions to the FP-7/C include:
- Revising Section B to remove extraneous or duplicative information
- Clarifying that commercial properties subject to the new tax rates are class 2 properties for real property tax purposes
- Clarifying the applicability of the new commercial tax rates to non-class 2 property when there is immediate prior common ownership of the commercial and non-commercial property
Please see the OTR tax notice regarding the revised form FP-7/C:
OTR Tax Notice 2019-06
The new form FP-7/C and FP-7/C instructions are now available on the Recorder of Deeds' website:
ROD1 Real Property Recordation and Transfer Tax (Form FP 7/C)(For recordings beginning October 1, 2019)
REMINDER: recordation/transfer tax increases to 2.5% on commercial properties starting October 1, 2019.
DC Tax Increase Update (7/19)
In a joint meeting with DCLTA and AOBA, D.C. Recorder of Deeds Ida Williams, and Robert McKeon (Deputy Chief Counsel with OTR) discussed the recently enacted Recordation and Transfer Taxes Amendment Act of 2019, which increases the recordation and transfer taxes applicable to commercial properties in the District of Columbia.
Background and Meeting Discussion
Summary of New Recordation and Transfer Taxes Amendment Act of 2019:
Increased recordation and transfer tax rates will be applied to deeds and deeds of trust on Class 2 commercial properties starting October 1, 2019. The new law will increase the combined effective rate from 2.9% to 5% on transactions valued over $2 million. The new 5% rate will also be applicable to economic interest transfers valued over $2 million. (For the enacted legislation, see the Fiscal Year 2020 Budget Support Act of 2019, Title VII, Subtitle C [beginning on p. 95] Bill #B23-0209,Act #A23-0092.)
Summary of Meeting:
The purpose of the meeting was to discuss the practical implementation of the new law, in particular its applicability to mixed-use buildings or to lots contained within mixed-use buildings. This may include apartment buildings listed as Class 3 but which contain a commercial component. OTR stated that the new tax rates would apply to any non-homestead property with a consideration of $2 million or more if any portion of the building in which the lot being conveyed or secured is located contains a commercial component. The basis for making this determination will be the certificate of occupancies for the building. Further clarification on the applicability of the new rates to mixed-use Class 3 properties is still being sought.
Mixed-use buildings containing both commercial and non-commercial components, often under separate ownership: OTR has advised that increased tax rates may not be applicable to the non-commercial components under this circumstance. Provided there is no direct or indirect common ownership between the grantor and the owner of the commercial component in the building, a claim for exemption may be made on the FP-7/C accompanying the deed or deed of trust. The Recorder of Deeds will then verify the non-common ownership by looking to the OTR Assessment Database and a sworn statement by the grantor in the FP-7/C.
Buildings with Former Commercial Components:
OTR advised that buildings with former commercial components, in which the commercial use was discontinued before the sale or encumbrance of the property, will be taxed based upon the current certificates of occupancy.
Application of New Rates:
ROD will likely look to the date of a document's acknowledgement to determine whether it is subject to the new rates. Further clarification is being sought.
If you have any questions or need additional information, please do not hesitate to contact an Underwriter at Fidelity NCS D.C.
New Baltimore Yield Tax (01/19)
Effective January 11, 2019, Baltimore City will impose a new "Yield" tax, the proceeds of which are dedicated to the Affordable Housing Trust Fund. With certain exceptions, this tax applies to all transactions for which City Recordation and Transfer taxes are due pursuant to Balto. City Code, Art. 28, Subtitles 16 and 17, and for which the consideration exceeds $1,000,000.
The rate of the Yield Tax is:
- 0.15% on the amount collected under Subtitle 16, Recordation Tax
- 0.6% on the amount collected under Subtitle 17, Transfer Tax
Additional Information:
Baltimore City Code Article 28, Subtitle 17.1 Recordation and Transfer Taxes - Yield Excise Tax (PDF)
Maryland Transfer and Recordation Tax Table Revised January 3, 2019 (PDF)
Please contact an Underwriters at Fidelity NCS D.C. if you have questions. (PDF)
Discover What’s New and Interesting in Our Backyard
As the nation’s capital, Washington, D.C. is steeped in history and is renowned for its distinctive character: it is at once an epicenter of politics, world-class tourist destination, working federal city and home to more than 672,000 residents.
The Washington metropolitan area, which includes “the District” and parts of Maryland, Virginia and West Virginia, is home to approximately 6.1 million residents and is the sixth-largest metropolitan area in the United States. As a major international hub for government, big business and tourism, our nation’s capital and its surrounding states feature some of the most dynamic and complex commercial real estate in the country.
Washington, D.C. has been experiencing an urban renewal for the past two decades, with billions in new investments in its downtown area, nearby neighborhoods and waterfront area. Investment in new retail, restaurants, and entertainment options have resulted in a population surge, according to the Washington DC Economic Partnership (WDCEP). The D.C. population has increased by 9 percent since 2010, and retail construction is on the rise to meet the population demand, with 1.9 million retail square footage under construction, according to WDCEP.
The area’s diverse economy creates unique opportunities for commercial real estate development. In May 2017, Washington, D.C. was named #6 on the IESE Cities in Motion Index, which ranks the world’s “smartest” cities analyzing their level of development in 10 key areas: governance, urban planning, public management, technology, the environment, international outreach, social cohesion, mobility and transportation, human capital and the economy. Easy access to lawmakers, close proximity to cybersecurity investment dollars, and a number of smart initiatives help to strengthen the commercial real estate market.
Commercial real estate construction remains at a fevered pace, the most since 2008, according to global real estate services firm Colliers International, with just over half of the space already committed after the first quarter of 2017.
About Fidelity National Financial
Fidelity National Financial, Inc. (FNF) is currently ranked #302 on the 2018 FORTUNE 500®*, and is among numerous defense, energy, media, hospitality and financial FORTUNE 500®* companies based in the region. Our Atlanta-based team of CRE professionals works in all facets of the industry, including power and energy projects, office buildings, industrial parks, multifamily housing, retail properties, government contracts, corporate transactions and more.
Discover what’s new and interesting in our backyard in the latest real estate news, provided courtesy of the FNF Newsdesk.
*From FORTUNE Magazine, June 2018 ©2018 Time Inc. Used under license. FORTUNE and FORTUNE 500 are registered trademarks of Time Inc. and are used under license. FORTUNE and Time Inc. are not affiliated with, and do not endorse products or services of, Fidelity National Financial.