Did corrective deeds used only to cure a title defect require full documentary stamp tax?

Subject

Transfer of Real Property to Cure a Title Defect

Plain-English summary

Only minimum documentary stamp tax was due on the two corrective deeds. The original sale of Lot B had already carried full tax. A city title issue then required the purchaser to deed Lot B back to the developer so the property could be converted into a condominium, followed by a simultaneous deed of Unit B back to the purchaser.

The corrective transaction changed no dimensions and involved no additional consideration. Its sole purpose was to cure the title defect.

What this means for you

Minimum-tax treatment depended on correcting a previously taxed deed rather than making a new compensated transfer.

Common questions

Q: Did both corrective deeds require full tax? No.

Q: Was additional consideration paid? No.

Q: Why did minimum tax apply? The deeds only corrected the earlier title defect after tax had been paid on the original transfer.

Citations and references

• Fla. Stat. § 201.02 — documentary stamp tax on real-property conveyances
• Fla. Admin. Code r. 12B-4.014(3) — corrective conveyances
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 00B4-010

Original ruling text

SUMMARY

QUESTION: Is the recording of a deed for the purpose of
curing a title defect subject to documentary stamp tax?

ANSWER - BASED ONE FACTS BELOW: Due to the fact that the
Corporation involved in developing and selling lots was
prevented by the City Attorney from selling individual
parcels of the building, the Corporation had to change the
form of ownership of the property to a condominium. The
lot which had already been conveyed to a purchaser by
special warranty deed with property documentary stamp tax
paid had to be reconveyed due to the requirement that the
property be treated as part of a condominium unit.

Since the sole purpose of the subsequent conveyance of the
Lot in question was to cure a title defect, and proper tax
was paid on the deed transferring the property from the
Corporation to the Contract Purchaser, only minimum
documentary tamp tax is due.

Sep 20, 2000

Re: Technical Assistance Advisement No. 00B4-010
Documentary Stamp Tax; Transfer of Real Property to Cure a
Title Defect
Section 201.02, F.S.; Rule 12B-4.014(3), F.A.C.
XXX (Corporation)
XXX (Contract Purchaser)
XXX (City)
XXX (County)

Dear :

This is in response to your request for a Technical
Assistance Advisement dated August 17, 2000, asking for an
opinion on whether conveyances recorded to cure a title defect
are subject to the documentary stamp tax.

FACTS PRESENTED BY THE PETITIONER

The Corporation purchased four contiguous lots in the City,
located in the County, with the intention of constructing a
building on the property and conveying four portions of the
property in fee simple to its prospective contract purchasers.
At the time, the Corporation did not intend on creating a
condominium and instead contemplated recording a Declaration of
Covenants and Restrictions to govern the rights of the parties
with respect to the fee simple ownership of the four parts of
the building. On March 31, 2000, the Corporation closed the
first of the four lots (Lot B) with its Contract Purchaser.
Immediately preceding the transfer of Lot B to the Contract
Purchaser, the Declaration of Covenants and Restrictions for the
Corporation was recorded in the County, identifying Lot B, and
Lots A, C, and D and the common areas. The purchase price of
Lot B was $231,877.00, and when the warranty deed from the
Corporation to the Contract Purchaser was recorded on April 4,
2000, documentary stamp tax in the amount of $1,623.30 was paid.

On April 12, 2000, the Corporation received a letter from
the City Attorney indicating that the Corporation was not
authorized to sell individual parcels of the building, because
no unity of title has been recorded with respect to the
development. In light of the City's letter, the Corporation was
prevented from closing Lots A, C, and D, and the Contract
Purchaser was prevented from obtaining a building permit from
the City for her proposed improvements to Lot B. To avoid
litigation and to effectuate the closings of Lots A, C, and D,
the Corporation followed the City's proposed resolution to
change the form of ownership of the property to condominium.

Under Chapter 718 of the Florida Statutes, all owners of
fee simple property must join in the Declaration of Condominium
to create a condominium. Since the Corporation had already
conveyed Lot B to the Contract Purchaser, and the Contract
Purchaser was not the developer, it was agreed that the Contract
Purchaser would reconvey Lot B to the Corporation, whereupon the
Corporation would execute and record the Declaration of
Condominium and simultaneously convey Unit B of the condominium

to the Contract Purchaser. In essence, the Contract Purchaser
merely exchanged Lot B for Unit B for no additional
consideration to effectuate the change of the form of ownership
to condominium to cure the defect. There were no changes to the
dimensions of the Unit, and no additional consideration was paid
for either the reconveyance of Lot B to the Corporation, or the
conveyance of Unit B to the Contract Purchaser.

On May 22, 2000, the Contract Purchaser reconveyed Lot B to
the Corporation by a special warranty deed. The Corporation
executed and recorded the Declaration of Condominium, and the
Corporation simultaneously conveyed Unit B to the Contract
Purchaser by special warranty deed. In connection with the
recording of the two special warranty deeds, the Corporation
paid minimum documentary stamp tax on each deed.

Requested Ruling

It is the Corporation's position that only minimum
documentary stamp taxes should be assessed, because the sole
purpose of the transaction was to cure a title defect and no
consideration was given.

Discussion and Law

Section 201.02(1), F.S., imposes the documentary stamp tax
on deeds, instruments, or writings that convey, grant, or
transfer real property or an interest in real property.

Rule 12B-4.014(3), F.A.C., states that, where a conveyance
is made to correct a deficiency in a previous deed on which the
tax has been paid, only a minimum tax is required.

Department's Response

Since the sole purpose of the subsequent conveyances of Lot
B was to cure a title defect, and proper tax was paid on the
deed transferring the property from the Corporation to the
Contract Purchaser, it is agreed that only minimum documentary
stamp tax is due on the subsequent deeds.

This response constitutes a Technical Assistance Advisement
under s. 213.22, F.S., which is binding on the Department only
under the facts and circumstances described in the request for
this advice, as specified in s. 213.22. Our response is
predicated on those facts and the specific situation summarized
above. You are advised that subsequent statutory or
administrative rule changes or judicial interpretations of the
statutes or rules upon which this advice is based may subject
similar future transactions to a different treatment from that
which is expressed in this response.

You are further advised that this response, your request
and related backup are public records under Chapter 119, F.S.,
and are subject to disclosure to the public under the conditions
of s. 213.22, F.S. Confidential information must be deleted
before public disclosure. In an effort to protect
confidentiality, we request you provide the undersigned with an
edited copy of your request for Technical Assistance Advisement,
the backup material and this response, deleting names, addresses
and any other details which might lead to identification of the
taxpayer. Your response should be received by the Department
within 15 days of the date of this letter.

Sincerely,

Joy B. Eldred, C.P.A.
Tax Law Specialist
Technical Assistance and Dispute Resolution
Office of the General Counsel

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