Tax Type
Recordation Tax
Description
Funding Agreement and Contract of Sale; Contract/Deed of Trust
Topic
Documents Subject to Tax
Date Issued
11-05-1985
[Opinion - Virginia Attorney General: 1985 at 309]
REQUEST BY: Honorable Walter L. Parrish Clerk, Circuit Court for the City of Petersburg
OPINION BY: Mary Sue Terry, Attorney General
OPINION:
You ask whether a certain instrument presented to your office for recordation is subject to taxation as a contract under § 58.1-807 of the Code of Virginia or as a credit line deed of trust under § 58.1-803. The instrument in question, self-described as a "Funding Agreement and Contract of Sale," concerns the manner in which certain houses of historic value in Petersburg will be sold, restored, maintained and opened for limited public viewing.
The instrument names the parties as the "Buyers" and two separate and distinct foundations, which I will denote as "A" and "B" for purposes of this Opinion. A "Trustee" is mentioned at several places in the instrument, but is not identified as a party to the agreement. The instrument provides for the conveyance by A of certain real property and improvements thereon to the Buyers, and for the funding by B of the restoration work on the property, under certain conditions. The primary condition is that the Buyers will restore two houses and dismantle a third located on the property, according to a strict timetable set forth in the instrument. Other conditions of the sale and funding arrangement are that the Buyers and their successors will open one of the houses to the public at specific times after restoration, and that the Buyers and their successors will maintain the houses and grounds in a specified manner.
The instrument provides that payments for the costs of restoration work will be made from advances from B to A, which is to pay the bills submitted by the Buyers. Advances will be made in installments of $ 5,000, as needed. No maximum amount of funding is stated or implied. The instrument further provides that, at settlement, which "shall take place on or before May 1, 1984," A will give to the Trustee three deeds of bargain and sale which convey the real estate and improvements to the Buyers as grantees. The Trustee will release the deed of each house to the Buyers upon performance of the restoration on that house, or will return the deed to A for A to destroy if the Buyers fail to perform the restoration of that house within the timetable.
Section 58.1-803 imposes a recordation tax on deeds of trust or mortgages. According to Black's Law Dictionary 911 (5th ed. 1979), "[a] mortgage is an interest in land created by a written instrument providing security for the performance of a duty or the payment of a debt . . . . The mortgage operates as a conveyance of the legal title to the mortgagee . . . ." A deed of trust is defined as "[a]n instrument . . . taking the place and serving the uses of a mortgage, by which the legal title to real property is placed in one or more trustees, to secure the repayment of a sum of money or the performance of other conditions." Id. at 373.
It appears that the instrument in question is neither a deed of trust nor mortgage given to secure an indebtedness. It neither conveys property to a trustee, as in a deed of trust, nor does it convey property to the creditor to be secured, as in a mortgage. As to whether this instrument is a "credit line" deed of trust, the fact that it is not a deed of trust or mortgage removes it from consideration as a specie of either. In addition, § 55-58.2 provides a definition of a "credit line deed of trust" for purposes of Title 55, relating to "Property and Conveyances," as "any deed of trust, mortgage, bond, or other instrument . . . in which title to real property . . . is conveyed, transferred, encumbered or pledged to secure payment of money . . . ." Because title to the subject property is not conveyed either to a creditor, to the Trustee, or to anyone else to secure payment of money, the instrument does not come within this definition. Rather, the property is conveyed directly to the Buyers by deed of bargain and sale which is held by the Trustee in an escrow arrangement pending the fulfillment of certain conditions, the repayment of money not being one of those conditions.
The instrument appears to be a contract for a conditional sale1 respecting real estate, including an agreement with respect to performance of property renovation and the funding thereof. Accordingly, it is my opinion that it is taxable as a contract under § 58.1-807.
1 "The distinction between a mortgage and a conditional sale is that a conditional sale is not a security for money, but a sale in good faith to be void upon the happening of a condition subsequent. A conditional sale not being a security for money, there is no equity of redemption incident to it . . . ." 13A M.J. Mortgages and Deeds of Trust § 8 (1978).
Attorney General's Opinion