Deeding a NYC Rental Into an LLC: Transfer Taxes, Filings, the Mortgage and Your Title Policy

When an owner deeds a New York City rental property into an LLC they own, the transfer is usually exempt from both the New York State transfer tax and the NYC Real Property Transfer Tax (RPTT), but only to the extent the owners’ beneficial interests stay the same. The deed still has to be recorded with full transfer tax returns, and for one- to four-family buildings the returns must disclose the LLC’s members. The two issues that most often cause trouble come later: the existing mortgage, which the transfer can put in default, and the owner’s title policy, which follows the property into the LLC only if the LLC fits the policy’s definition of an insured.

This guide covers NYC deeds. The State transfer tax and its exemption apply statewide; the RPTT and the City Register filing process apply only in the five boroughs.

Transfer taxes: the mere change of identity exemption

Two transfer taxes apply to NYC deeds, and each has its own version of the same exemption.

New York State transfer tax. Tax Law § 1405(b)(6) exempts “conveyances to effectuate a mere change of identity or form of ownership or organization where there is no change in beneficial ownership.” The State regulation, 20 NYCRR 575.10, applies it proportionally: a conveyance is exempt to the extent the grantors end up with the same pro rata interests in the new entity, and taxable to the extent they do not.

NYC RPTT. NYC Administrative Code § 11-2106(b)(8) contains the City’s mere change of identity exemption. The NYC Department of Finance (DOF) describes it as exempt but reportable: no tax is due on the exempt share, but a return is still filed, and the exemption applies “only to the extent that the beneficial ownership remains the same.”

In practice:

Who owns before Who owns the LLC after Result
You, 100% You, 100% Exempt
You and spouse, 50/50 You and spouse, 50/50 Exempt
You, 100% You 60%, partner 40% 40% taxable
You and sibling, 50/50 You 70%, sibling 30% 20% taxable

The taxable share is measured against the full consideration for the conveyance. Where it is not fully exempt, RPTT on residential property (such as a one- to three-family house or a residential condo unit) is 1% up to $500,000 and 1.425% above; most other property is 1.425% or 2.625% above $500,000 (DOF RPTT page). The State tax is $2 per $500 of consideration, with an additional rate on NYC conveyances of $3 million or more for residential and $2 million or more for other property (Tax Law § 1402).

Later changes to the LLC can unwind the exemption

The exemption is tested on substance. In Matter of 105-02 Forest Hills, LLC, TAT(E) 20-18(RP) and 20-19(RP) (decided September 3, 2025), the NYC Tax Appeals Tribunal reversed an administrative law judge and upheld an RPTT assessment where a building was deeded to an LLC under a full mere change claim and a developer was admitted as a 40% member about two months later. The Tribunal treated the steps as one transaction and limited the exemption to the 60% the original owners kept (Blank Rome summary). If you plan to bring in an investor or sell membership interests, that plan affects how the deed should be reported. A later transfer of a controlling interest in the LLC can also be taxable on its own under both taxes.

What DOF ruling FLR-24-5033 shows

In FLR-24-5033 (January 22, 2025), a nonprofit college had deeded a property to its single-member LLC for no consideration, claiming the § 11-2106(b)(8) exemption, so a lender could hold the property in a bankruptcy-remote entity. DOF accepted that transfer as exempt. The question was the LLC’s later sale to a third party: the college’s own sale would have been exempt as a nonprofit, but DOF held the LLC’s sale was taxable because the lender-driven structure meant the college did not fully control the LLC. DOF stated that a transaction is taxed “based on the deal structure” the parties selected. The ruling does not analyze the mere change exemption itself, but it shows that moving property into an entity can change the tax result of the next transfer.

Filings for the deed into the LLC

The deed is recorded with the City Register through ACRIS in Manhattan, Brooklyn, Queens and the Bronx. Staten Island returns are filed through ACRIS and also on paper with the Richmond County Clerk (DOF).

  • State return (TP-584-NYC) and NYC-RPT. Both are required even when no tax is due (Tax Law § 1409(a)(1); DOF). The exemption is claimed on the returns, so the claimed percentage of unchanged ownership needs to match the LLC’s actual ownership. The RPTT return is due within 30 days of the transfer.
  • LLC member disclosure. When an LLC is the grantor or grantee of a deed to a residential building with up to four family dwelling units, the State return is not accepted for filing unless it is accompanied by a list of the names and business addresses of all members, managers and other authorized persons (Tax Law § 1409(a)(2)). If a member is itself an entity, its owners must be listed too, until natural persons are reached. DOF applies the same rule to NYC-RPT filings for one- to four-family deeds dated on or after September 13, 2019, and also asks for member identification numbers or an affidavit explaining what is missing (DOF). Larger buildings are outside this specific requirement.

The NY LLC Transparency Act is a separate regime and is narrower than its name suggests. It took effect January 1, 2026, but after Governor Hochul vetoed a bill to expand it on December 19, 2025, it applies only to LLCs formed outside the United States that are authorized to do business in New York (Willkie; Baker McKenzie). A New York or Delaware LLC holding a rental does not file under it.

The mortgage: due-on-sale risk

Deeding the property to the LLC does not move the mortgage. The lien stays on the property and the original borrower stays liable on the note. Most residential mortgages let the lender accelerate the loan if the property is transferred without consent.

The federal Garn-St Germain Act (12 U.S.C. § 1701j-3(d)) bars lenders from enforcing due-on-sale clauses on certain transfers of residential property with fewer than five units, such as a transfer to a spouse or into an inter vivos trust where the borrower remains a beneficiary. A transfer to an LLC is not on that list.

What protects some borrowers is the investor’s own servicing rules. Fannie Mae’s Servicing Guide D1-4.1-02 treats a transfer to an LLC as an allowable exemption if the loan was purchased or securitized by Fannie Mae on or after June 1, 2016, the original borrower controls or owns a majority of the LLC, and any change to investment occupancy does not violate the security instrument. The servicer must also tell the borrower that the property will need to move back to a natural person to qualify for a refinance. Portfolio, bank and commercial loans follow their own documents.

Before recording, find out who owns the loan and get the lender’s or servicer’s written position. For a commercial or portfolio loan, that usually means a formal consent.

The title policy: does it follow the property into the LLC?

An owner’s policy normally ends when the insured conveys title. Whether the LLC takes over the coverage depends on the policy form.

2021 ALTA owner’s policy. New York moved to the 2021 ALTA forms under the TIRSA rate manual effective October 1, 2024 (Mann Report). Condition 1(g)(i)(e)(1) of the 2021 owner’s policy includes as an insured the grantee of an Insured if the grantee is an “Affiliate.” Condition 1(a) defines Affiliate as an entity wholly owned by the Insured, one that wholly owns the Insured, or one owned by the same person or entity that wholly owns the Insured.

2006 ALTA owner’s policy. Older policies cover a grantee wholly owned by the named Insured, but only under a deed “delivered without payment of actual valuable consideration” (Condition 1(d)(i)(D) of the 2006 form).

“Wholly owned” is read literally. In Tithonus Partners II, LP v. Chicago Title Ins. Co. (W.D. Pa. Oct. 8, 2021), a 99.9% owner was held not to qualify (Riker Danzig summary). An LLC with any member besides the insured, including a spouse who was not on the policy, may fall outside the definition. Even when the LLC qualifies, the insurer keeps every defense it had against the original insured, and the coverage still runs only to the original Date of Policy. Nothing that happens after that date, including the deed into the LLC itself, is insured.

Situation Policy follows to LLC?
2021 form, LLC 100% owned by the named insured Yes, as an Affiliate
2006 form, 100% owned, no consideration Yes
LLC has a member not named on the policy Likely not
Policy issued to two co-owners, LLC owned by both Unclear; ask the insurer

When the policy will not follow, or the owner wants coverage through the transfer date, the LLC can buy a new owner’s policy. Under the TIRSA rate manual it is priced like any owner’s policy, and the amount cannot be less than the greater of the contract price or fair market value (premiums explained). The TIRSA manual has no reduced rate for a transfer to an owner’s own entity. A new policy also brings a fresh search, which picks up any liens or judgments filed against the owner since purchase.

Before you record: a short checklist

  1. Confirm the LLC’s ownership percentages match the current owners’ interests, or calculate the taxable share.
  2. Prepare the TP-584-NYC and NYC-RPT in ACRIS with the member disclosure for one- to four-family buildings.
  3. Get the lender’s or servicer’s written position on the transfer.
  4. Ask the title insurer whether the LLC qualifies as an insured under your policy form, or order a new owner’s policy.
  5. Check the recorded deed in ACRIS and consider DOF’s free recording alerts.

Official sources

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Korvane Title is preparing to launch in New York. It is not licensed as a title insurance agent and does not accept title orders. Content on this site is general information, not legal advice.