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June 24, 2020

Stroock Special Bulletin

By: Jeffrey R. Keitelman, Kim Pagotto, Albert M. Singer

The Commonwealth of Virginia and certain counties in Maryland have made changes to their respective transfer and recordation tax schemes, impacting closing costs for sales and acquisitions of properties located in such jurisdictions.  The changes, some of which take effect as early as July 1, 2020, are as follows:

Virginia

  • Effective July 1, 2020, a Regional Congestion Relief Fee (“RCR Fee”) will be assessed at the rate of $0.05 for each $100 or fraction thereof on each deed or other instrument transferring real property located in any county or city in a planning district that has a population of 2 million or more, has not less than 1.7 million vehicles registered therein, and has a total transit ridership of not less than 50 million riders per year across all transit systems within the planning district. Northern Virginia (“Northern Virginia”),[1] made up of Arlington County, Fairfax County, Loudoun County, Prince William County, the City of Alexandria, the City of Manassas, and the City of Manassas Park, is such a planning district. The RCR Fee will be assessed in addition to the Regional WMATA Capital Fee (“WMATA Fee”) that is imposed on sellers transferring real property located in Northern Virginia, which continues to remain in place. The RCR Fee will be payable by the seller, but a seller and buyer may agree on a different allocation of responsibility to pay the RCR Fee.

  • Effective May 1, 2021, the WMATA Fee will be reduced from $0.15 for each $100 or fraction thereof to $0.10 for each $100 or fraction thereof.

  • Effective May 1, 2021, the RCR Fee will increase from $0.05 for each $100 or fraction thereof to $0.10 for each $100 or fraction thereof.

  • Minor Fees: Effective July 1, 2020, the (i) Library of Virginia Fee collected for recording and indexing documents, and which is designated for use in preserving the permanent records of the circuit courts, increases from $1.50 to $3.50; and (ii) Open Space Preservation Fee charged for every deed, deed of trust or other document recorded in jurisdictions in which open-space easements are held by the Virginia Outdoors Foundation increases from $1.00 to $3.00.

Maryland

  • Montgomery County:   Beginning on July 1, 2020, when assessed value is to be used in determining the amount that is subject to recordation and county transfer taxes, the county will use the “assessed value”[2] of the property rather than the “phase-in value.”  The assessed value of a property in Maryland is its full cash value as of the most recent assessment.  In Maryland, where property values are reassessed once every three (3) years, when the assessed value of a property increases, for property tax purposes, the increase is phased-in in equal increments over the three (3) years following the reassessment.  For example, for property tax purposes, a property with a previously assessed value of $1,000,000 that experienced an increase to an assessed value of $1,300,000 after reassessment would have the $300,000 increase in assessed value phased-in over the three (3) years following the reassessment (i.e., (i) Year 1: phase-in value of $1,100,000; (ii) Year 2: phase-in value of $1,200,000; and (iii) Year 3: phase-in value of $1,300,000).

  • Howard County: Beginning on July 1, 2020, the transfer tax rate will increase from 1% to 1.25%.  In addition, the transfer of moderate income housing units is now exempt from county transfer taxes.

  • Frederick County: Beginning on October 1, 2020, the recordation tax rate will increase from $6.00 to $7.00 per $500 of consideration.

Stroock’s national Real Estate Group is available to assist with any of your questions regarding the transfer tax increases and changes described above.

_______________________________________________
For More Information:

Jeff Keitelman

Kim Pagotto

Albert Singer


[1] The following is a link to a map showing the planning districts in Virginia (including Northern Virginia and the counties and cities that comprise it), with population numbers:  https://www.dhcd.virginia.gov/sites/default/files/Docx/clg/general-info/localities-and-pdcs.pdf

[2] Maryland uses the term “current value” as the assessed value (after reassessment) and the term “base value” as the assessed value of the property prior to the most recent reassessment.  The following is a link to a description of Maryland’s property tax and assessment scheme: https://dat.maryland.gov/realproperty/Pages/HomeOwners-Guide.aspx

The following is a link to a glossary of terms provided by Maryland’s Department of Assessment and Taxation: https://sdat.dat.maryland.gov/RealProperty/Pages_HTML/rp_def.aspx#:~:text=Phase%2DIn%20Assessments,over%20the%20next%20three%20years.&text=If%20a%20property's%20value%20decreases,multiplied%20to%20determine%20tax%20liability.

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