Deed Tax Land Developers and Builders

Sale of Lot Only

If land is sold without any contractual agreement to have a structure built on it, Deed Tax is based on the price paid for the land.

Land Sold with Contractual Agreement to Build House

If land is sold under an agreement which includes the building of a home at a future date the basis for calculating the Deed Tax includes the price being paid for both the land and the home. The date the deed is recorded has no effect on the amount of Deed Tax due. (Minnesota Statutes 287.20, subdivision 2 (d))

Landowner Transferring Property to Contractor for Financing Purposes

M.S. 287.222 was created to impose a $1.65 on the recording of deeds used to: (i) temporarily transfer real property from an owner to a contractor/builder to enable the contractor/builder to obtain financing to build an improvement for the owner, and (ii) transfer the property back to the owner.

Example:

Paul owns a unimproved lot which he plans to build a home on. For financing purposes, Paul conveys the real property to his builder who uses the lot as collateral for a construction loan. Once the home is completed the builder conveys the real property back to Paul.

The minimum tax of $1.65 is due on both conveyances.