New York City Commercial Real Estate Loans: Taxes, LL97 & ICAP

A New York City commercial loan uses the same programs as anywhere — SBA 504, DSCR, CMBS, bank and bridge loans. What the city changes is the size of the closing taxes, how the property is taxed afterwards, and a set of building laws that lenders now check as closely as the rent roll. New York State rules — CEMA refinancing, court foreclosure, C-PACE law — are in the New York guide.

Closing taxes, city and state

A New York City sale pays two transfer taxes. The city's real property transfer tax on commercial property is 1.425% of the price up to $500,000 and 2.625% above. The state adds 0.4%, or 0.65% on a city commercial sale of $2 million or more. The loan pays the mortgage recording tax: the city's 1.75% on commercial loans of $500,000 or more (1.125% to the general fund and 0.625% to transit) plus 1.05% to the state, for 2.8%.

Example: a $2,000,000 building bought with a $1,400,000 loan.

• State transfer tax: $2,000,000 × 0.65% = $13,000
• City transfer tax: $2,000,000 × 2.625% = $52,500
• Mortgage recording tax: $1,400,000 × 2.8% = $39,200
• Total: $104,700, before title insurance, lender fees and legal costs

By law the seller pays the transfer taxes unless the contract shifts them, and the borrower pays the recording tax, but all three shape the price and the cash you bring. On a refinance, a CEMA limits the recording tax to the new money — ask both lenders about it before you choose one.

Property tax: Class 4 at 45%

Commercial property is Class 4. The Department of Finance sets a market value and assesses the property at 45% of it, before phase-ins and exemptions; the tax is that assessed value times the Class 4 rate for the year. Lenders underwrite the tax at the current bill and the assessment trend, so check the notice of property value and any phase-in still running before you set the price.

New construction and major improvements can qualify for ICAP, which abates property tax for 15 years on most commercial work and up to 25 years on industrial projects and commercial projects in designated areas. The preliminary application must be filed before the first building permit is issued, and the minimum required spending must be made within four years of that permit. Much of Manhattan's core is excluded for new commercial construction, so confirm the location — and file — before you pull permits.

Building laws lenders check

• Local Law 97. Most buildings over 25,000 sq ft have annual emissions limits; each metric ton over costs $268 a year. A lender treats the penalty as an operating expense, so an over-limit building supports a smaller loan at the same DSCR.
• Local Law 88. Buildings over 25,000 sq ft had to upgrade lighting and sub-meter tenant spaces by January 1, 2025. Ask for the compliance report.
• Facade inspections. Buildings over six stories file a facade report every five years; unsafe conditions must be fixed within 90 days.
• DOB violations. Open violations can block a sale or refinance and hold up a new Certificate of Occupancy. Older violations show only in the Buildings Information System, newer ones in DOB NOW — search both.

The fix for an LL97 gap can be financed off the mortgage: NYC Accelerator PACE, run by NYCEEC under Local Law 96 of 2019, can cover up to 100% of qualifying energy and compliance work, repaid through the property tax bill. The existing mortgage lender has to consent.

Tenants and the Commercial Rent Tax

In Manhattan south of 96th Street, a tenant paying $250,000 or more a year in rent owes the Commercial Rent Tax — an effective 3.9% of base rent, reduced by a sliding credit for rents under $300,000, with some Lower Manhattan zones exempt. The tax is the tenant's, but it is part of what a tenant can afford, and it matters when you underwrite rents on a Manhattan office or retail building.

If a loan goes to foreclosure

New York forecloses through the courts. The mandatory settlement conference applies only to residential home loans, so a commercial foreclosure moves to judgment and a referee's auction without it — in Manhattan on Tuesday afternoons at 60 Centre Street, in Brooklyn on Thursdays at 360 Adams Street. Lenders price that path, which is one reason city loans lean on guaranties and conservative LTV.

Where to start

For an owner-occupied building, SBA loans are handled through lenders, with the SBA's Metro New York District Office at 26 Federal Plaza. For an investment property, compare a DSCR loan with a bank or CMBS loan, and size it with the commercial mortgage calculator after you add the closing taxes above. Start a commercial real estate loan request — one application, compared across our lender network.

Sources: NYC Department of Finance (transfer tax, mortgage recording tax report 2024, assessment terms, Commercial Rent Tax, ICAP); NYC Department of Buildings (LL97, LL88, facade program, violations); NYC Accelerator; New York State Unified Court System (22 NYCRR 202.12-a, foreclosure auction pages); U.S. Small Business Administration. Checked 2026-09-29.