In July 2025, when New Jersey Gov. Murphy adopted the annual budget, it included a provision that had not been discussed and surprised many in the real estate community.
The legislation changed the “mansion tax” from a 1% buyer fee on purchases above $1 million to a 3.5% seller fee on purchases above $3.5 million, with a sliding scale up to 3.5%.
Before this legislation, a buyer of residential or commercial property in New Jersey with a purchase price of more than $1,000,000 would have to pay 1% of the purchase price as a “mansion tax” at the title closing. This is a separate tax from the realty transfer fee, which has always been a seller fee due at closing based upon a sliding scale established by statute.
The legislation is significant because it shifted the “mansion tax” (now called the “Graduated Percent Fee”) to the seller’s side of the ledger and substantially increased the fee amount (while keeping the realty transfer fee intact).
Example #1: The $20 million sale of commercial property used to result in a realty transfer fee of $239,475.00 (paid by the seller) and a mansion tax of $200,000 (paid by the buyer)
Now, the fee is $939,475, all of which is paid by the seller.
Example #2: The $2,000,000 sale of a residential dwelling used to result in a realty transfer fee of $21,675.00 (paid by the seller) and a mansion tax of $ 20,000 (paid by the buyer).
Now, the fee is $41,675, all of which is paid by the seller.
Example #3: The $50,000,000 sale of a commercial property used to result in a realty transfer fee of $602,475 (paid by the seller) and a mansion tax of $500,000 (paid by the buyer).
Now, the fee is $2,352,475, all of which is paid by the seller.
It has taken some time for the effect of this change to sink in, according to Craig Alexander, a partner and co-chair in the real estate group at Mandelbaum Barrett PC in Roseland.
Initially, the commercial real estate markets focused on getting contracts signed and deals closed before the new legislation took effect (there was a window before it took effect). Buyers also agreed for a while to split the cost, since they had budgeted for paying a 1% mansion tax when the deals were initially negotiated.
Buyers are no longer helping to pay it
“But as of 2026, buyers are no longer accommodating and insist that sellers pay for it all,” Alexander told BINJE. “Even now, many real estate owners and brokers are not aware of this new law.”
Alexander said that, as an attorney, he’s been handed letters of intent and term sheets for the sale of a commercial property that did not address the mansion tax or use vague language stating that the parties would adjust for customary closing costs.
He then had to explain to the client what the combined RTF and mansion tax would cost – and as a result, many deals did not move forward, because the client could not justify spending so much money on fees (also after calculating in the broker’s commissions).
“The deals did not pencil out,” he said. “Many commercial real estate owners have decided to hold onto their assets, refinance existing loans, or sell if there is a viable 1031 exchange option.”
Alexander said it’s worth noting that the mansion tax does not apply to property classified as industrial or multi-family property (such as apartment buildings).
“This has led more investors to seek industrial and multi-family property – thereby driving up prices and leaving shrinking inventory in those two sectors,” he explained.
Alexander said some real estate attorneys have addressed this issue by seeking to have the municipality change the property’s classification from commercial to industrial (if there is a basis for doing so), convey the property by multiple deeds (each for less than $1 million), or convey the membership interests in the property owner rather than a deed conveyance, though these steps raise unique concerns about payment of the fee, he said.
“Considering the State’s budget deficit, it is difficult to imagine the mansion tax will ever be reduced; perhaps a portion of the fee will be shifted back to the buyer,” Alexander said. “Certainly, the market for commercial property (office and retail strip centers) will be less active, which may drive even more investors to consider other, more tax-friendly jurisdictions.”
