Request By:
Mr. Glenn A. Hoskins
Webb & Webb, Attorneys, P.S.C.
800 Merrill Lynch Plaza
Lexington, Kentucky 40507
Opinion
Opinion By: Steven L. Beshear, Attorney General; By: Alex W. Rose, Assistant Attorney General
In your recent letter to the Attorney General, you requested an opinion on the applicability of the real estate transfer tax to an instrument of conveyance transferring a lease-hold estate in an individual condominium in the Vine Center Complex in downtown Lexington.
You state that thirty-nine (39) condominiums are being constructed above the Radisson Plaza Lexington Hotel. These units will occupy an "air lot" leased by Vine Company to the Vine Development Corporation for a forty (40) year period through an "Air Rights Lease" dated March 20, 1981 and recorded in the Fayette County Clerk's Office. Vine Development plans to sell the individual condominiums and transfer ownership by executing an instrument of conveyance to be recorded in the Fayette County Clerk's Office. Your question is whether the clerk is required to collect the real estate transfer tax imposed by KRS 142.050 when the individual conveyances are offered for recording.
Kentucky's horizontal property law is found in KRS 381.805 through 381.910. These statutes generally provide that each unit in a condominium is a distinct entity capable of real property ownership. A purchaser of a condominium unit receives a recordable deed conveying a fee simple title to the unit and an undivided interest in the common elements. The owner may convey or encumber the unit in any manner he wishes, but in so doing he does not jeopardize the interests of any co-owner in the project. Each condominium unit is taxed separately and a co-owner has no responsibility for the individual debts of other co-owners. The instrument or deed conveying or transferring ownership under the facts set forth in this paragraph would be subject to the real estate transfer tax.
KRS 143.050(2) provides as follows:
"A tax upon the grantor named in the deed is imposed at the rate of fifty cents (50 ) for each five hundred dollars ($500) of value or fraction thereof, which value is declared in the deed upon the privilege of transferring title to real property. "
A "deed" is defined in KRS 142.050(1)(a) as "any document, instrument or writing (other than a will and other than a lease or easement), regardless of where made, executed or delivered whereby any real property in Kentucky, or any interest therein, is conveyed, vested, granted, hargained, sold, transferred or assigned."
Here, however, Vine Development Corporation has only a forty (40) year lease which it will assign by an instrument of conveyance to individuals or corporations purchasing condominium units. The instrument used to transfer ownership is an assignment of a lease and is by definition not a deed.
We are of the opinion that the instruments conveying the leasehold interest of Vine Development Corporation to individual purchasers are not subject to the real estate transfer tax imposed by KRS 142.050.