Significant Changes to New Jersey’s “Mansion Tax” and Realty Transfer Fees:

New Seller Obligations Effective July 10, 2025

On June 30, 2025, the New Jersey Legislature enacted new legislation (A5804, S4666) that substantially revises the state’s “mansion tax” and realty transfer fee structure. These changes will impose significant new financial obligations on sellers of certain high-value residential and commercial properties in New Jersey. Of critical importance, the new law shifts the responsibility for payment of “mansion” tax by purchasers to a new supplemental realty transfer fee payable by sellers and significantly increases the applicable rates for qualifying transactions.

Key Changes and Affected Property Classes

Previously, purchasers of the following property types (collectively, “Qualified Property”) with a purchase price of $1,000,000 or more were required to pay a 1% “mansion tax” at closing:

• Class 2: Residential property
• Class 3A: Farmland with a building or structure intended or suited for residential use
• Class 4A: Commercial property (excluding industrial or apartment properties)
• Class 4C: Cooperative units

Effective July 10, 2025, the obligation to pay the supplemental realty transfer fee will shift from purchasers to sellers (grantors) of Qualified Property. The new supplemental realty transfer fee rates for Qualified Property will be as follows:

1% $1,000,000 – $2,000,000
2% Over $2,000,000 – $2,500,000
2.5% Over $2,500,000 – $3,000,000
3% Over $3,000,000 – $3,500,000
3.5% Over $3,500,000

Notably, the supplemental realty transfer fee will be payable at closing in addition to the existing New Jersey Realty Transfer Fee under N.J.S.A. 46:15-7. As a result, the transfer tax obligations of sellers of Qualified Property in New Jersey will significantly increase as of July 10, 2025, unless otherwise contractually allocated by the parties to a transaction.

In addition to modifying the 1% “mansion” tax, the legislation also amends the 1% controlling interest transfer tax, which applies to the sale or transfer (for consideration exceeding $1,000,000) of a controlling interest in an entity that owns, directly or indirectly, Class 4 “commercial” real property. Under the new law, the responsibility for payment also shifts from the purchaser to the seller and the applicable rates mirror those of the supplemental realty transfer fee described above.

New Jersey’s County Clerks will begin collecting the supplemental realty transfer fee on July 10, 2025. Of critical importance, for transactions under contract prior to July 10, 2025, a partial refund may be available for amounts paid in excess of 1%, provided the deed is submitted for recording before November 15, 2025.

The new legislation represents a significant shift in both the responsibility and amount of realty transfer fees for high-value real estate transactions in New Jersey. Both purchasers and sellers of Qualified Property should be mindful of materially increased transfer costs obligations (based on the terms of their respective contracts) and confirm amongst parties how the increased transaction costs are to be allocated. Parties currently negotiating or under contract for affected transactions should carefully consider the timing of contract execution and deed recording to potentially benefit from the transitional relief provided in the legislation.