Tuesday, February 19, 2008

Chicago's transfer tax: good grief - what next?

The Tribune reports that the City of Chicago is considering trying to collect a transfer tax from the buyer even when the buyer backs out of a deal to purchase property in the city. What are we going to call this -- the non-transfer tax? The "Never mind, I'm Not Coming to Chicago Tax?"

This could have big implications on commercial deals. When would the tax be triggered? Is it due if a buyer does its due diligence on a $100 million office building and walks away penalty-free under the purchase agreement, or only once an earnest money deposit becomes non-refundable? A 1% breakage fee of this sort could have a chilling effect on deals in Chicago.

UPDATE AND POSTSCRIPT: remember, unlike most of the world (and most of our area, for that matter), in Chicago the buyer pays the transfer tax. I did not even bring up the issue of how one collects this from, say, a defaulting buyer of a condo at the Spire who lives abroad. Will the city be able to lien the seller's property (which makes no sense)? Are they going to go after these buyers? What about broker commissions? The possibilities are endless.


Mark A. said...

These are all half-baked City Hall ideas, one of which will eventually come to fruition. The key thing to keep in mind is, as long it's not a mayoral election year, any idea to juice Chicagoans (or future city residents) is welcome.