After January 1, 2015, documentary transfer tax will no longer be a private affair. It is common practice in commercial real estate purchase and sale transactions to provide the amount of documentary transfer tax on the conveyance in an unrecorded declaration to prevent the purchase price from being readily ascertainable. The Documentary Transfer Tax Act currently permits this practice. The declaration is not recorded. It is attached to the deed by the recorder after the permanent record is made and before the original is returned. The amendments enacted by AB 1888 will eliminate this practice and procedure.

Documentary transfer tax is considered “an excise tax on the privilege of transferring real property” (City of Huntington Beach v. Superior Court, 78 Cal. App. 3d 333, 341 (1978)). The tax is imposed on deeds or other instruments conveying real property based on the purchase price “or value on which the tax due was computed” excluding the value of any lien or encumbrance remaining on the property at the time of sale. Under the new law, not only will the location of the property be required to be shown on the face of the deed, but also the amount of the transfer tax due. The effective date provides a bright line; there are no exceptions for pending purchase and sale transactions.