NYC Tax Tribunal Applies Step Transaction Doctrine to Limit “Mere Change” Exemption Under Real Property Transfer Tax
The application of the federal “step transaction” doctrine to New York City (“NYC”) real estate transactions can severely limit application of the long-standing “mere change in form” exemption under NYC’s real property transfer tax (“RPTT”). Case in point: a recent decision of the NYC Tax Appeals Tribunal, reversing a determination of an Administrative Law Judge (“ALJ”), and ruling that a deed of real property from an existing limited liability company (“LLC”) to a newly-formed LLC—both beneficially owned 50-50 by the same two owners—did not qualify for a full “mere change” exemption because the newly-formed LLC thereafter admitted a new 40 percent member to develop the property. Matter of 105-02 Forest Hills, LLC et al., TAT (E) 20-18(RP), 20-19(RP) (N.Y.C. Tax App. Trib., Sept. 3, 2025).
The Facts: Don Rick Associates LLC (“Grantor”) deeded a commercial building to 105-02 Forest Hills LLC (“Grantee”) (“Deed Transfer”), a newly formed LLC entity owned by GG Forest Hills LLC (“GG”). The Grantor’s two 50 percent members also indirectly owned, through GG, the same percentage interests in the Grantee.
Since the Grantor’s two members owned the same beneficial interests in the building both before and after the Deed Transfer, the Grantor claimed a 100 percent mere change in form exemption from the RPTT. Under the RPTT, a conveyance of real property or an economic interest in that property that effects a “mere change of identity or form of ownership” is exempt “to the extent the beneficial ownership” in the realty before and after the transaction remains unchanged. NYC Adm. Code § 11-2106.b(8).
Approximately two months after the Deed Transfer, another party, SPG Forest Hills LLC (“SPG”), was admitted as a 40 percent member of Grantee to develop the realty (“Interest Transfer”). GG continued to own the remaining 60 percent. It does not appear that an RPTT return was filed for the Interest Transfer, presumably because it was considered a nontaxable transfer of a 40 percent economic interest in Grantee. Separate from deed transfers, the RPTT also applies to the transfer of an economic interest in an entity that owns real property, but only for transfers of a 50 percent or more interest in the entity.
ALJ Determination: The NYC Department of Finance (“Department”) assessed RPTT, invoking the “step transaction” doctrine to collapse the Deed and Interest Transfers into a single transaction, and reducing the 100 percent “mere change in form” exemption by the 40 percent economic interest in Grantee acquired by SPG. The ALJ ruled in favor of Grantee, holding that while the Department was authorized to apply the step transaction doctrine, the substance of the collapsed transaction was the transfer of a less-than-50 percent membership interest in Grantee. An appeal to the NYC Tribunal followed.
Tribunal Decision: The NYC Tribunal disagreed with the ALJ determination and upheld the assessment, adopting the Department’s position that when the Deed Transfer and Interest Transfer are collapsed under the step transaction doctrine, the “Grantor retained a 60% majority economic interest in the Property and SPG received a 40% minority economic interest in the Property.” According to the Tribunal, this meant that “40% of the transaction”(emphasis added)—i.e., both the Deed Transfer and the Interest Transfer—was taxable because the mere change exemption on the Deed Transfer applied only to the extent of the Grantor’s retained 60 percent interest in Grantee.
Observation: The NYC Tribunal decision is a stark reminder of the considerable uncertainty under the RPTT caused by application of the “step transaction” doctrine, a federal income tax doctrine that the NYC Tribunal first authorized in Matter of GKK 2 Herald LLC, TAT (E) 13-25 (RP) (NYC Tax App. Trib. 2016), aff’d, 154 AD 3d (1st Dept 2017). There is no mention of the doctrine in the RPTT regulations and, specifically, no mention of how it is applied to recharacterize a series of transactions to limit a “mere change in form” exemption. Considering the continued uncertainty, NYC property owners should carefully structure transfers to account for potential application of the step transaction doctrine.
IRS Proposes Retroactive Withdrawal of Look-Through Rule for Domestically Controlled REITs
On October 20, 2025, the Internal Revenue Service (“IRS”) announced a proposed regulation that, if finalized, withdraws last year’s domestic corporation look-through rule for determining whether a real estate investment trust (“REIT”) is domestically controlled. In the interim, taxpayers may rely on this proposed regulation.
Domestically Controlled REITs—Background
The Foreign Investment in Real Property Tax Act (“FIRPTA”) taxes foreign investors on their sale of U.S. real property interests. However, an interest in a domestically controlled REIT is not a U.S. real property interest.[1] Accordingly, foreign persons are not subject to FIRPTA, and thus not subject to U.S. taxation, on their sale of domestically controlled REIT stock.
A REIT is considered domestically controlled if foreign persons hold directly or indirectly less than fifty percent of the fair market value of the REIT stock at all times during the relevant testing period, which generally is the five-year period preceding the sale of the shares. Many foreign investments in REITs are structured through U.S. corporations to benefit from this FIRPTA exception, a structure which was allowed by the IRS in a 2009 private letter ruling.[2]
The Current Regulatory Look-Through Rule
On April 24, 2024, the IRS issued final regulations that looked through certain domestic corporations if they have more than fifty percent foreign ownership. This final look-through rule was narrower in scope than the original look-through rule proposed in 2022, which looked through domestic corporations if they had twenty-five percent or more foreign ownership. While more narrow in scope, the final look-through rule was nonetheless the subject of negative taxpayer feedback. Based on this month’s announcement, the IRS was listening.
The Proposed Withdrawal of the Look-Through Rule
On October 20th, the IRS issued a proposed regulation that completely withdraws the domestic corporation look-through rule.[3] In doing so, the Treasury Department and the IRS explained that they shared concerns raised by taxpayers that there were practical difficulties in trying to trace through upstream ownership to apply the look-through rule. This resulted in legal uncertainty, operational complexity, and a potentially chilling effect on investment in U.S. real estate. They further recognized that as domestic corporations are subject to U.S. corporate income tax, the objectives of FIRPTA are satisfied without having to look through domestic corporations.
The proposed regulation, if finalized, would apply to transactions on or after October 20, 2025. Additionally, if the proposed regulation is finalized, taxpayers will be permitted to apply the final regulation retroactively, once published in the Federal Register, to transactions occurring on or after April 25, 2024 (the date the current rules were finalized). Finally, and of particular immediate benefit, taxpayers are allowed to rely on the proposed regulation now.
This change only affects the requirement to look through a domestic C corporation to its shareholders. Passthrough entities, such as partnerships and limited liability companies that have not elected out of the default rules applicable to limited liability companies, remain subject to the existing look through rules.
Footnotes
[1] IRC § 897(h)(2).
[2] PLR 200923001 (Feb. 26, 2009). While private letter rulings are not binding on the IRS, they are nonetheless illustrative and helpful guidance for taxpayers.
[3] REG-109742-25.
Legislature Adopts Bill to Limit Density Bonus Law Benefits for Mixed-Use Projects
California Senate Bill 92 (“SB 92”), introduced in January 2025 by Senator Catherine Blakespear and having been passed by both the California State Assembly and State Senate was approved by the Governor on October 10, 2025. SB 92 amends California’s Density Bonus Law (Government Code Section 65915 et seq.) (“SDBL”) to limit a developer’s ability to apply for concessions, incentives, and waivers of development standards for mixed-use projects that include nonresidential uses.
Specifically:
cities and counties will not be required to provide certain SDBL benefits to a hotel, motel, bed and breakfast inn or other transient lodging component of a mixed-use project, except a residential hotel (i.e., a building containing 6 or more guestrooms or efficiency units to be used as the primary residence of the guests[1]); and
for any applications submitted after January 1, 2026, concessions or incentives granted under the SDBL shall not result in a proposed project with a commercial FAR greater than two and a half times the premises’ current allowed base zone commercial FAR. Additionally, projects that have submitted a preliminary application (under the Housing Crisis Act of 2019, or “SB 330”[2]) are not subject to this limit.
According to comments from the bill’s author, these changes address the purpose of the SDBL to create housing and not hotels and other nonresidential uses. According to its stated Legislative intent, however, the purpose of the SDBL is “to cover at least some of the financing gap of affordable housing with regulatory incentives, rather than additional public subsidy[.]”[3] A series of reforms adopted since 2020 broadened the benefits developers can receive in order to offset the cost of providing affordable units, while limiting local agencies’ ability to deny those benefits. The Legislature’s action in adopting SB 92 reveals a step-back in the flexibility afforded to developers to structure projects that include affordable housing under a law that has helped develop thousands of deed-restricted affordable units throughout the State.[4] This change could incrementally reduce the use of the SDBL to develop projects that include affordable units, especially in coastal and other high-cost areas where developers often rely on the benefits afforded by SDBL.
Existing Density Bonus Law
The SDBL is a heavily utilized tool that encourage developers to include affordable units in their project by providing economic benefits that decrease the overall cost of the project. The SDBL can be used to achieve increases above the base density of property that allows residential use without rezoning, which otherwise requires a discretionary (legislative) approval. It also permits deviations from development standards that would otherwise limit the development of the project as proposed, including the existence of affordable units, without discretionary deviations or variances. [5] In 2022, Assembly Bill (“AB”) 1551 was enacted to make clear that mixed-use developments (projects that include both residential and non-residential uses) qualify for benefits under the SDBL.[6]
Density Bonus
If a “housing development project”, including a mixed-use development, includes at least five residential units and the minimum percentage of affordable units (starting at 5% Very Low Income (i.e., households earning up to 50% of the Area Median Income (AMI)) units), the project is entitled to receive bonus density, ranging from 5% to 100%, depending on the level of affordability and percentage of affordable units in the development.
The SDBL was updated by Assembly Bill (“AB”) 1287 (2023)[7] to allow for “stacking” or combining density bonuses projects to earn between 20% and 50% percent more density (70-100% total), if the developer also agrees to restrict 5-10% of the units in the project for Very Low Income or 5-15% of the units in the project for Moderate Income (up to 120% AMI) families. With AB 1287, a project can achieve double the base density with a minimum of 20% of the base density units restricted to Very Low Income households, without discretionary rezoning. on the distribution
SB 92 does not alter the requirement that if a “housing development project” includes the requisite percentage of affordable units, the project will still be eligible to receive between 5% to 100% density bonus.
Concessions or Incentives and Waivers
In addition to bonus density, under current law, a project meeting the minimum criteria is entitled to “concessions” and “incentives” which include:
A reduction in site development standards or a modification of zoning code requirements or architectural design requirements that exceed the minimum building standards can result in identifiable and actual cost reductions such as a reduction in setback and square footage requirements or the ratio of vehicular parking spaces that would otherwise be required. These cost reductions help result in an incentive for more affordable housing and lower rents for targeted units.[8]
Approval of mixed-use zoning in conjunction with a housing project if commercial, office, industrial, or other land uses will reduce the cost of the housing development and if the commercial, office, industrial, or other land uses are compatible with the housing project and the existing or planned development in the area where the proposed housing project will be located. [9]
Other regulatory incentives or concessions proposed by the developer or the city or county that result in identifiable and actual cost reductions to provide for affordable housing costs, or for lower rents for targeted units. [10]
The number of concessions or incentives a project qualifies for, like the density bonus, depends on how many affordable units are proposed and the level of affordability the project includes. Local agencies bear the burden of proof to deny a requested concession or incentive.[11]
In addition to concessions or incentives, the SDBL provides that an applicant may submit a proposal for the waiver or reduction of development standards that have the effect of “physically precluding” the construction of the project at the densities or with the concessions or incentives permitted under the SDBL.[12] While the number of concessions or incentives is limited and based on the percentage and affordability level of the affordable units in the project, there is no limit on the number of waivers a project can receive.
SB 92
SB 92 includes the following text in Section 65915 of the Government Code:
“(l) (1) (A) A concession or incentive shall not result in a proposed project with a commercial floor area ratio that is greater than two and a half times the premises’ current allowed base zone commercial floor area ratio.
(B) This paragraph shall not apply to proposed projects that have submitted a preliminary application or an entitlement application prior to January 1, 2026.
(2) Subdivision (e) and subdivision (k) do not require a city, county, or city and county to approve, to grant a concession or incentive requiring approval of, or to waive or reduce development standards otherwise applicable to, a hotel, motel, bed and breakfast inn, or other transient lodging, other than a residential hotel, as defined in Section 50519 of the Health and Safety Code, as part of a housing development subject to this section. For purposes of this paragraph, ‘other transient lodging’ does not include a resident’s use or marketing of their unit as short-term lodging, as defined in Section 17568.8 of the Business and Professions Code, subsequent to the issuance of a certificate of occupancy in a manner otherwise consistent with local law.”
Floor Area Ratio Cannot Exceed Two and a Half Times
As discussed above, the SDBL is applicable to mixed-use developments that include five or more residential units and the requisite percentage of affordable units to be eligible for a density bonus, concessions or incentives and waivers of development standards. Generally, FAR is a development standard that measures the ratio of floor area in the development to the lot area of the premises.[13] Through use of the SDBL, reductions in setbacks, increases in development square footage and reduced parking requirements (as parking is often excluded from FAR) can result in a project’s FAR increasing by more than two and a half times that permitted by the base zone.
Under SB 92, a concession or incentive would no longer permit an “unlimited” increase in FAR, as applied to the commercial component of a mixed use development. Previously, a city or county would have been required to grant a concession or incentive to an eligible project regardless of whether it would result in the commercial portion of the project exceeding the allowed FAR for commercial space on the premises by more than two and a half times. While SB 92 continues to allow an increase in commercial FAR that would otherwise be allowed on the site subject to this limit, it constrains developers’ flexibility to leverage commercial uses to make residential development with affordable units feasible.
Timing
This provision of SB 92 does not apply to proposed projects that have submitted a preliminary application or an entitlement application prior to January 1, 2026. Accordingly, pending projects that propose to exceed the limit but have not filed an entitlement application should consider filing a preliminary application before SB 92 takes effect to be eligible to receive a commercial FAR greater than two and a half times the premises’ current allowed base zone commercial floor area ratio.
A preliminary application under SB 330 requires only high-level project information and permits applicants for a housing development project that includes a mix of commercial and residential uses with two-thirds of the project’s square footage used for residential purposes to proceed under the law in place as of the time of submission and payment of the permit processing fee to the agency from which approval for the project is being sought, provided that a full application for development is thereafter filed within 180 days.[14]
Hotels Eliminated
In addition to the limit on commercial FAR in a housing development project, SB 92 also expressly states that local agencies are not required to grant incentives or concessions that require approval of, or waive or reduce development standards otherwise applicable to a proposed hotel component of a mixed use development, including a hotel, motel, bed and breakfast inn or other transient lodging, except for a residential hotel.[15]
Accordingly, a city or county could deny any such concession, incentive or waiver relating to a hotel component of a housing development project subject to the SDBL (even if it does not increase commercial FAR by more than two and a half times the base commercial FAR).
Implications – Less offset for the additional cost of building affordable units
Although SB 92 purports to align with the policy goals of the SDBL to create more affordable housing, without the benefits developers receive under SDBL to offset the cost of including affordable units in the development, the effect of SB 92 could be a reduced number of affordable units, especially in planned mixed-use developments in more expensive locations throughout the state.
With the cost of developing affordable units being offset by the ability to develop certain uses, such as hotel rooms, SDBL concessions and incentives allow for the development of affordable units in areas that would otherwise be too expensive for a developer’s project to be financially feasible. For example, coastal development is the most expensive development due to, among other contributing factors, the price of land and additional regulatory requirements such as obtaining a Coastal Development Permit from the Coastal Commission. Thus, SDBL is a tool that developers can use to include affordable units in a project near the coast while pursuing a financially feasible development.
SDBL concessions and incentives, such as removal of height restrictions or parking requirements, for the development of a project that includes hotel use and five or more residential units with the requisite amount deed restricted as affordable is a tool for developers to pursue a mixed use project in an area, such as the coast, that would otherwise be too expensive.
Accordingly, by eliminating hotels, motels, and other transient lodging uses from being eligible for concessions and incentives that offset the additional costs of building affordable units, SB 92 creates another barrier making the already expensive development of affordable units near the coast even less financial viable.
Developers Rowing Against Policy
As the bill’s author Senator Blakespear noted, “The California Legislature created the density bonus law to encourage private market developers to include deed-restricted affordable housing in their projects in exchange for zoning waivers and concessions. Legislators carefully constructed this law to require a fair exchange between developers and the communities they were building in. … SB 92 will close [a] loophole brought to light … and ensure density bonus law provides the fair bargain it was designed to deliver.”[16]
SB 92 is an example of a legislative reaction to developers using a law aimed at encouraging the development of affordable units for other types of development, even where the law allowed flexibility to include such other uses as a means of making affordable units feasible. This serves as a cautionary tale when utilizing the benefits of a law to achieve what may be viewed as a different outcome than is intended. Certain lawmakers view the practice of developing the requisite amount of affordable units in order to increase commercial FAR or to obtain other concessions and incentives for hotel development, as a “loophole” and as a result, drafted SB 92 to close it.
Sheppard Mullin’s Real Estate, Energy, Land Use & Environmental Practice Group will continue to monitor and report on recent housing laws and their impact on development.
FOOTNOTES
[1] Health and Safety Code Section 50519
[2] Government Code Section 65941.1.
[3] Government Code Section 65915(u).
[4] https://shou.senate.ca.gov/system/files/2025-02/recent-leg-actions-factsheet-updated-feb-2025_0.pdf
[5] Government Code Section 65915(b)(1)(G).
[6] Government Code Section 65915(i).
[7] Government Code Section 65915(v). Sheppard Mullin’s Land Use Team Authors New California Law Expanding Affordable Housing Incentives | Sheppard Mullin (San Diego Land Use partner Jeff Forrest drafted the bill pro bono for Circulate San Diego).
[8] Government Code Section 65915(k)(1).
[9] Government Code Section 65915(k)(2).
[10] Government Code Section 65915(k)(3).
[11] Government Code Section 65915(d)(4).
[12] Government Code Section 65915(e)(1).
[13] “Floor area ratio” means the ratio of gross building area of the eligible housing development, excluding structured parking areas, proposed for the project divided by the net lot area. Government Code Section 65917.2(a)(2).
[14] Government Code Section 65941.4.
[15] Health & Safety Code Section 50519.
[16] 202520260SB92_Senate Floor Analyses.pdf
Proposed Regulations Remove Look-Through Rule for Domestically Controlled REITs
I. Introduction
On October 20, 2025, the U.S. Department of the Treasury (“Treasury”) and the Internal Revenue Service (the “IRS”) issued proposed regulations (the “Proposed Regulations”) that would helpfully revoke the current “look-through rule” for domestic C corporation shareholders to determine whether a “real estate investment trust” (a “REIT”) is “domestically controlled”. Accordingly, under the Proposed Regulations, a domestic C corporation shareholder is treated as a domestic person for purposes of determining whether a REIT is domestically controlled. Ownership interests in domestically controlled REITs are not treated as “United States real property interests” (“USRPIs”)[1], and non-U.S. persons that sell interests in them are not subject to U.S. federal income tax on the gain. The Proposed Regulations permit taxpayers to rely on the Proposed Regulations before they are finalized and, if the Proposed Regulations are finalized as proposed, they would be retroactive to transactions occurring on or after April 25, 2024 (effectively nullifying the current regulations, which were finalized on April 24, 2024, and reverting to the rules prior to the current regulations).
II. Background
Section 897 of the Code[2] subjects a non-U.S. person to U.S. tax on any gain recognized upon a disposition of a USRPI at regular U.S. tax rates. Equity interests in a “domestically controlled qualified investment entity” (which includes a domestically controlled REIT) are not USRPIs.[3] Therefore, a non-U.S. investor may sell shares in a domestically controlled REIT without being subject to U.S. income tax under section 897.
On April 24, 2024, Treasury and the IRS issued final regulations (the “2024 Final Regulations”) that applied a rule under which domestic C corporation REIT shareholders that are “foreign-controlled domestic corporations”[4] would be looked through to their non-U.S. owners in determining whether a REIT is domestically controlled. Accordingly, the 2024 Final Regulations limited the ability of foreign investors to invest in a domestic blocker to cause a REIT to be domestically controlled. The 2024 Final Regulations are described in more detail in our prior blog post.
III. The Proposed Regulations
The Proposed Regulations effectively retroactively revoke the look-through rule for foreign-controlled domestic corporations contained in the 2024 Final Regulations and treat all domestic C corporations as U.S. persons for purposes of determining whether a REIT is domestically controlled. U.S. taxpayers are permitted to rely on the Proposed Regulations before they are finalized and, if finalized, the Proposed Regulations would apply retroactively.
[1] A USRPI includes real property located in the United States or the Virgin Islands, and also equity interests in a domestic “United States real property holding corporation”, which is generally a corporation whose assets consist of 50% or more USRPIs by value.
[2] All references to section are to the Internal Revenue Code of 1986, as amended.
[3] A REIT is domestically controlled if less than 50% of its stock by value is held “directly or indirectly” by foreign persons (i.e., more than 50% of its stock is held by U.S. persons) at all times during the period during which the REIT was in existence or, if shorter, the five-year period ending on the date of a sale of shares in the REIT.
[4] A foreign-controlled domestic corporation is a non-public domestic corporation that is more than 50% owned, directly or indirectly (by value) by non-U.S. owners.
Rita N. Halabi contributed to this article
Builder’s Risk Insurance In Peak Hurricane Season- Three Things Policyholders Need to Know Now
The United States recently dodged direct hits by Hurricanes Erin and Imelda, but those in the construction industry are still in the cone of uncertainty when it comes to protecting their projects this hurricane season. According to NOAA, 93% of hurricane landfalls along the U.S. Gulf and East coasts occur between August and October. Property owners and contractors should approach insurance coverage for peak hurricane season with Category 5 focus.
This is especially true in states like Florida and Texas, where construction is booming. Property owners and contractors face significant risks to their construction projects during this season. But builder’s risk insurance can help mitigate those risks.
Below is a primer on what builder’s risk insurance is and three things policyholders need to know about their builder’s risk policies now that hurricane season is in full swing.
What Is Builder’s Risk Insurance?
Builder’s risk insurance is a temporary, first-party property insurance product designed to cover property damage to buildings under construction, renovation or repair and on-site project materials. Some policies also cover construction project materials stored off-site and soft costs, like additional architectural or permitting fees. Delayed completion coverage is an optional add-on. It covers income losses or additional expenses resulting from the project’s delay in completion as a result of covered property damage.
While policies are often tailored to specific projects, builder’s risk policies typically cover losses from weather-related incidents. So, when hurricane season whips up, this coverage can help policyholders weather the financial storm.
Three Things to Know
To ensure that construction projects are adequately protected this hurricane season, property owners and contractors should know three things:
1. Who is responsible for obtaining coverage differs.
Responsibility for purchasing this insurance varies. Typically, contractors and property owners agree on this term in the construction contract; which party buys the policy often depends on who has greater buying power in the market. The cost of the policy itself, which is separate from who is required to obtain coverage, is typically borne by the owner as part of the contract price. In addition, if an owner is obtaining construction financing, the lender providing such loan may also have specific requirements as to the type and amount of builder’s risk coverage that the owner will need to obtain, as a prerequisite to the loan. A construction lender’s requirements will usually be determined through its internal underwriting process, and in negotiation with the owner and the general contractor.
Standard industry forms differ on who should obtain coverage. AIA Document A133™–2019 Exhibit B, which discusses insurance and bonds, provides for the owner to obtain builder’s risk coverage. In contrast, the ConsensusDocs 200 Standard Agreement and General Conditions Between Owner and Constructor (Lump Sum) originally called for the contractor to obtain builder’s risk coverage. Updates suggest the parties should focus on which party bears the risk for uncovered damage and negotiate coverage accordingly to establish a framework for risk and repair obligations.
This lack of consistency can lead to neither party obtaining sufficient coverage or both parties obtaining duplicative coverage. Neither is desirable. As the Ninth Circuit has stated, “The next worst thing to having no insurance at all is having two insurance companies cover the same claim.”[1] Insurers are repeat litigators with deep pockets, so they can spend “months, even years, wrangling with one another, while the insured and the provider of the covered services are left holding the bag.”[2]
2. Not all policies are created equal.
Unlike other types of insurance, such as commercial general liability and homeowners insurance, there is no true standard builder’s risk policy. This means that not all builder’s risk policies provide the same coverage.
When it comes to coverage for hurricane-related damages, not all builder’s risk policies even provide protection. Some offer no windstorm coverage at all. Others provide coverage for damage caused by wind, but not for flooding associated with a windstorm. Or they are subject to large deductibles or low caps, squeezing coverage from one side or the other – or both. That can leave policyholders in the eye of a coverage gap.
So, it is critical that property owners and contractors read their builder’s risk policies carefully to ensure they have the coverage they need to ride out the storm.
3. How your builder’s risk policy handles multiple causes of loss.
As discussed above, some builder’s risk policies provide coverage for damages or loss caused by a windstorm, but not by a flood. Hurricanes often bring both. To avoid the storm of coverage litigation this can lead to, some insurers have included anti-concurrent cause exclusions in policies in an effort to deny coverage when there is a dispute regarding the cause of the loss. An example of such an exclusion is as follows:
“We do not insure for loss caused directly or indirectly by any of the following. Such loss is excluded regardless of any other cause or event contributing concurrently or in any sequence to the loss.”[3]
The enforceability of these exclusions came into focus after Hurricane Katrina, when it was heavily disputed whether losses were caused by wind, flood, or both. So what can policyholders do? Carefully review your policy to ensure that both wind and flood are covered. If that is not possible, review your policy for an anti-concurrent cause exclusion and try to negotiate around it. Finally, seek the guidance of coverage counsel to determine whether the law of the applicable jurisdiction recognizes the enforceability of the anti-concurrent cause exclusion. This proactive approach before a claim may help ensure that your project proceeds with little interruption in the calm after the storm.
[1] PM Grp. Life Ins. Co. v W. Growers Ass. Trust, 953 F.2d 543, 543 (9th Cir. 1992). This case involves two ERISA-covered health benefit plans, but it is a truism for many insurance coverages.
[2] Id.
[3] Cheetham v. Southern Oak Ins. Co., 114 So.3d 257, 260 (Fla. 3d DCA 2013)
Home Equity Products 101
Home equity products enable homeowners to unlock the value of their homes through a variety of financing contracts. Each product has distinct features, benefits, and risks. In this post, we compare and contrast common home equity products, including home equity lines of credit (HELOC), closed-end home equity loans (HEL), reverse mortgages, and home equity agreements (HEA). Each of these products has any number of variations, and as a result, this post is only intended to describe the products at a high level and provide an informational overview of the most common features and considerations associated with each product.
Home Equity Line of Credit (HELOC)
Structure: HELOCs provide a revolving line of credit, similar to a credit card, secured by a home’s equity.
Disbursement: Borrowers can draw funds as needed up to a set limit during a “draw period” (typically five to10 years). During the draw period, repayment of amounts advanced make the funds available to borrow again.
Repayment: Interest-only payments may be due during the draw period; principal and interest payments are owed during the repayment period (often 10-20 years).
Interest Rate: Rates are usually variable and fluctuate with market rates. However, some HELOCs are now being offered at fixed rates.
Consumer Uses: Homeowners leverage HELOC products to fund ongoing expenses, such as home renovations and tuition.
Applicable Laws: TILA and Regulation Z apply to HELOCs. The laws require certain disclosures, periodic statements, and a right of rescission, and impose certain advertising rules. However, some TILA and Regulation Z requirements do not apply to HELOCs, including the Ability to Repay Rule. Some portions of RESPA and Regulation X apply to HELOCs, but the mortgage servicing rules (12 CFR § 1024.30 – 1024.41) exclude “open-end lines of credit (home equity plans)” from their definition of a “mortgage loan.” Many states also have laws specifically governing HELOCs as well.
Pros: They provide flexibility, and interest is charged only on what consumers spend.
Cons: Variable interest rates can result in uncertainty and increase payments, risking foreclosure if the homeowner defaults.
Regulatory Landscape: The laws and regulations around HELOCs are well-developed, from both the federal and state perspective.
Home Equity Loan (HEL)
Structure: An HEL is a lump-sum loan secured by a home’s equity.
Disbursement: There is a one-time payment of the full loan amount.
Repayment: Fixed monthly payments of principal and interest are due over a set term (typically five to 30 years).
Interest Rate: The interest rate is fixed, providing predictable payments.
Consumer Uses: These loans are typically for large, one-time expenses (e.g., debt consolidation, major home improvements).
Applicable Laws: Because they are closed-end credit, TILA, RESPA, and their implementing regulations fully apply to HELs. State laws on mortgage loans will also apply.
Pros: Payments are predictable with a fixed-interest rate.
Cons: Because there is less flexibility, consumers must pay interest on the full amount beginning at origination, and there is a risk of foreclosure if the homeowner defaults.
Regulatory Landscape: Because they are a form of closed-end mortgage loans, the laws and regulations around HELs are generally well-developed, from both the federal and state perspective.
Reverse Mortgages
Structure: Loans are generally available to homeowners age 62+, allowing them to convert home equity into cash.
Disbursement: Disbursement options vary, including a lump sum payment, monthly payments, a line of credit, or a combination.
Repayment: There is generally no monthly payment required; the loan is repaid when the homeowner sells, moves out, or passes away.
Interest Rate: The rate can be fixed or variable.
Consumer Uses: Consumers can supplement retirement income to cover living expenses.
Pros: Typically, there are no monthly payments, and allows access to cash in retirement, often non-recourse (prevents homeowners owing more than their homes’ value). No minimum credit score required.
Cons: Home equity is reduced, fees can be high, heirs may inherit less, the home must be maintained, and taxes/insurance must be paid.
Regulatory Landscape: Most reverse mortgages are insured by the Federal Housing Administration (FHA), and approximately half of the states across the country have enacted statutes governing reverse mortgages.
Home Equity Agreement (HEA)
Structure: Homeowners receive cash in exchange for a share of their home’s future appreciation.
Disbursement: There is a lump-sum payment, but typically no monthly payments.
Repayment: Consumers must repay the HEA company the original amount plus an agreed share of home appreciation when the home is sold, refinanced, or after a set period of time (usually 10–30 years).
Interest Rate: There is no traditional interest rate imposed. The repayment amount is based on the home’s value at the end of the agreement. However, some states have taken the position that the appreciated value of the home could be considered interest, potentially creating usury-compliance concerns.
Consumer Uses: Consumers can access cash without monthly payments or new debt.
Pros: There are no monthly payments, and it offers flexible use of funds and no interest.
Cons: Homeowners must share a percentage of their appreciation, there may be restrictions on home use or improvements, and HEAs are not available everywhere.
Regulatory Landscape: HEAs are a relatively new consumer product and regulation of the space is in its early stages. There are only a handful of states that have laws, public comments from regulators, pending legislation, or pending regulations regarding HEAs. Therefore, this is an area to watch for future activity as to whether the products require licensing and regulation for origination and servicing.
London Real Estate Practice Quarterly Legal Update – Autumn 2025
Welcome to the GT London Real Estate Practice’s Autumn 2025 newsletter, reviewing a range of legal and practice developments that may affect stakeholders within the UK real estate sector.
Chancel Repair Liability
On 15 July, the Law Commission published a consultation on chancel repair liability — a remnant of 16th century law requiring some private landowners to keep the chancel of a parish church in good repair.
Since 13 October 2013, chancel repair liability is no longer an “overriding interest” for registered land, meaning it should only bind purchasers of registered land if noted on the title register. However, ongoing uncertainty around the interpretation of the law means that, regardless of whether there is such a notice in place or not, chancel repair searches and insurance remain common practice for purchasers.
The Law Commission’s consultation seeks to remove this uncertainty by clarifying that chancel repair liability is only enforceable against purchasers of registered land if noted on the title register, and that this should apply retrospectively to all relevant notices and transfers since the Land Registration Act 2002 came into effect.
The consultation closes on 15 November 2025.
Non-Bank Lending
In July 2025, the Financial Services Regulation Committee of the House of Lords commenced an inquiry into the growth of non-bank lending, including whether developments in bank regulation following the global financial crisis have inhibited the amount of bank lending and the implications of non-bank financial institutions satisfying this unfilled demand for credit.
In this GT Alert, Tim Dolan and Partha Pal examine the Committee’s key focus areas in more detail and the potential implications for market stability and systemic risk.
Proposed Ban on Upwards Only Rent Reviews
In this GT Alert, Rachel Whittaker and Sue Wilson explore the key provisions of the UK government’s proposed ban on upwards-only rent reviews in new commercial leases in England and Wales and the potential implications for landlords and investors.
Renters’ Rights Bill
The Renter’s Rights Bill is in its final stages and expected to become law this month.
Amongst other things, the Bill would abolish section 21 “no fault” evictions and fixed-term tenancies, replacing them with periodic tenancies that tenants may terminate with two-months’ notice, as well as reforming the grounds for landlord possession.
Restructuring Plans
Greenberg Traurig London advised River Island, the well-known design and fashion retail chain in the UK and Ireland, on the restructuring of its financial and leasehold liabilities, implemented by way of a restructuring plan under Part 26A of the Companies Act 2006.
On 8 August, Sir Alastair Norris, judge of the High Court of England and Wales, sanctioned the River Island Restructuring Plan, marking a development in the UK’s restructuring landscape. The judgment provides clarification and practical guidance on the operation of restructuring plans under Part 26A of the Companies Act 2006, particularly regarding the Court’s discretion to exercise its cross-class cram-down powers.
Aaron Harlow, John Houghton, and Morag Russell provide a detailed analysis of the decision in this GT Alert.
Service Charge Code
On 25 June, The Royal Institution of Chartered Surveyors (RICS) released the 2nd Edition of its Service Charges in Commercial Property Professional Standard (also known as the Code) to reflect current best practices for service charge management.
The revised Code, which takes effect for service charge periods from 31 December 2025, updates the existing guidance and serves as a reference for landlords, property managers, tenants, and stakeholders, aiming to promote fairness, clarity, and consistency in service charge processes. Although not legally binding, it establishes a benchmark for lease negotiations, management, and dispute resolution, reinforcing the principles of transparency, financial accountability, and governance.
There is greater emphasis in the second edition on full disclosure (utilising digital platforms where possible for ease of document accessibility), transparent financial reporting, and proactive communication between stakeholders. Tenants are expected to actively review information and engage with landlords to prevent misunderstandings, while regular updates and open sharing of information help build trust and reduce disputes.
Further enhancements in the Code address dispute resolution and service charge governance. The “pay now, argue later” principle from recent case law is reaffirmed, and the use of alternative dispute resolution (ADR) is encouraged, with RICS able to appoint mediators if needed. The Code also clarifies the treatment of improvement works, requiring consultation and written consent from tenants when such costs may be included. Strong governance standards are mandated, including oversight by qualified professionals, written management policies, and performance monitoring, to ensure ethical conduct and effective stakeholder engagement across all aspects of service charge management.
* Special thanks to Trainee Solicitors Riccardo Mitchell˘ and Namrata Ranpuria˘ for contributing to this GT Newsletter.
˘ Not admitted to the practice of law.
PA’s Chester County Creates Human Rights Commission; Employers to Face Expanded List of Protected Classes
Takeaways
Nondiscrimination provisions covering employment, housing and public accommodations take effect 12.23.25.
Joining a state trend to fill perceived gaps in state and federal protections, the ordinance expands protections based on gender identity, gender expression, and more.
The new Chester County Human Relations Commission has investigatory and quasi-adjudicatory authority.
Relate link
Chester County Ordinance No. ORD-2025-03
Article
The Chester County Board of Commissioners recently adopted Ordinance No. ORD-2025-03, creating the Chester County Human Relations Commission (CCHRC) and enacting broad countywide nondiscrimination provisions covering employment, housing and public accommodations. Passed 2-1 along party lines on Sept. 24, 2025, the ordinance takes effect 90 days after enactment, Dec. 23, 2025.
Modeled on the Pennsylvania Human Relations Act (PHRA), 43 P.S. § 951 et seq., the Chester County ordinance substantially expands the list of protected classes beyond those already covered by state law. The ordinance expands protections based on gender identity, gender expression, sexual orientation, marital and familial status, source of income, veteran status, and status as a victim of domestic or sexual violence.
These additional protections reflect a growing local trend in Pennsylvania as several other counties (including Delaware, Lehigh, and Montgomery) have enacted similar ordinances or taken steps in recent years to fill perceived gaps in state and federal protections. Chester County’s action makes it the first “collar county” around Philadelphia to implement a county-level enforcement mechanism.
The CCHRC is set to consist of seven to 13 volunteer members, appointed by the county commissioners for staggered three-year terms. While volunteers serve without compensation, the county has authorized limited funding and legal support through the Solicitor’s Office. The Commission has investigatory and quasi-adjudicatory authority: It may receive verified complaints, conduct investigations, issue subpoenas, and, if conciliation fails, hold public hearings. Remedies include cease-and-desist orders, restitution and civil fines of up to $500. Commission determinations are appealable to the Chester County Court of Common Pleas under the Local Agency Law, 2 Pa.C.S. § 751, et seq.
The Chester County ordinance was enacted under Section 12.1 of the PHRA, which expressly authorizes municipalities and counties to establish local human relations commissions. In practice, this creates concurrent jurisdiction. For instance, an aggrieved individual may file either with the state PHRC or with the local county commission, but generally not both for the same claim. The local body serves as a first-tier forum intended to offer faster, community-based resolution of discrimination complaints. The Chester County Commission also may refer or coordinate cases with the PHRC when state-level expertise or enforcement is warranted.
Complaints must be filed within 180 days of the alleged discriminatory act, either online or through the County Solicitor’s Office. The process includes preliminary jurisdictional review, investigation and conciliation, followed (if necessary) by an adjudicative hearing. Retaliation against complainants or witnesses is expressly prohibited.
The ordinance reflects a different approach to civil rights enforcement in Pennsylvania. Local governments may extend protections beyond state minimums while coordinating with the PHRC. Chester County intends its commission to serve as a complementary, rather than competing, mechanism for addressing discrimination at the community level.
Critics are characterizing the Commission as duplicative, noting that residents already fund the PHRC through state taxes. Proponents view it as a subsidiary mechanism designed to improve accessibility and responsiveness on a local level. Which view eventually prevails remains to be seen; either way, Chester County employers should be prepared for a potential extra level of nondiscrimination enforcement starting in December.
Interpretation of Charging Clauses – Edwards Industrial Products Pty Ltd v Thwin and Zaw
Charging clauses are found in a raft of commercial documents including guarantees, construction contracts, agreements for lease, leases and deeds between a landowner and a local authority. This decision is a helpful reminder of the requirements to create a valid charge and the rights that are available to a charge holder if a charge is found to have been properly created.
An equitable charge typically arises by agreement between the parties, under which the charged property is made liable for or is appropriated to secure the performance or discharge of the relevant contractual obligation.
On 20 February 2025, in a decision of Lundberg J, the Supreme Court of Western Australia in the matter of Edwards Industrial Products Pty Ltd v Thwin and Zaw [2025] WASC 48 declined to grant the plaintiff the relief it sought under a charging clause. At issue was whether a charging clause in the contract to lease ceased to have effect upon the execution of the formal lease, which did not contain a similar term.
This case note considers the court’s interpretation of the relevant charging clause, through its application of the established principles relating to equitable charges, the doctrine of merger and entire agreement clauses.
Underlying Facts
The facts of the case are uncontroversial. The action concerned a lease arrangement over a commercial property in Kenwick (Property). The plaintiff (Lessor) was the owner of the Property, and the defendant (Lessee) leased the Property to run a business of repairing bumpers.
On 16 April 2014, the parties executed a contract to lease the Property (Contract to Lease). The Contract to Lease appears to have been a standard REIWA form where details are inserted and blanks are completed. Six weeks later, on or around 1 June 2014, the parties executed a formal lease concerning the same Property (Lease). In or about November 2019, after the Lease had expired, the Lessor sent the Lessee a letter claiming moneys due under the Lease. The Lessee did not pay the money, and on 20 November 2019, the Lessor lodged an absolute caveat against the Lessee’s residence, claiming an interest as chargee.
Charging Clause
In this case, the relevant clause in dispute was clause 7.2 of the Contract to Lease, which read as follows:
7.2 The Guarantors and the Lessee jointly and severally agree to charge any other land in which they have a partial or full interest as owner both now and at any time in the future in favour of the Lessor as security for repayment of any money due and payable to the Lessor under the lease. If a Lessee is in default of its obligations pursuant to the lease, the Guarantor and the Lessee agree that the Lessor will be entitled to register an absolute caveat against their land until the default is remedied (the ‘Pleaded Equitable Charge’).
Importantly, there was no equivalent clause within the Lease itself, and such absence was the central issue addressed in the case.
Issues Arising at Trial
Two primary issues (which this article frames into questions) arose at trial being (at [13]–[15]):
Firstly, did clause 7.2 of the Contract to Lease immediately give rise to the Pleaded Equitable Charge?
Secondly, and in the event that an equitable charge arose upon execution of the Contract to Lease, did the charge survive and form part of the formal Lease, or did the charge cease to exist upon execution of the Lease?
Principles of Construction
The court identified that the issues raised required an application of the orthodox principles of contract construction. Relevantly, the court restated (at [32]–[34]):
The proper construction of a commercial contract is to be determined objectively having regard to its text, context and purpose;
The contract will be given a businesslike interpretation on the assumption that the parties intended to produce a commercial result; and
Where a commercial transaction is implemented by various instruments, all of the contracts or documents may be read together to ascertain their proper construction, at least where they are executed contemporaneously or within a short period.
Furthermore, where parties to an existing contract enter into a further contract which varies the original contract, the determining factor is always the intention of the parties as disclosed by the later agreement (at [35]). As identified by Taylor J in Tallerman & Co Pty Ltd v Nathan’s Merchandise (Victoria) Pty Ltd (1957) 98 CLR 93 at [22], it may be material to determine whether:
The effect of the second contract is to end and replace the first contract; or
The effect of the second contract is to leave the first contract standing, subject to the alteration.
Equitable Charge
The court discussed the common law regarding equitable charges. His Honour noted that charges are creatures of equity and are only enforceable in equity (at [36]). Further, there is no transfer of title or possessory title in the charged property (at [38]). Relying on Morris Finance Ltd v Brown [2017] FCAFC 97 (Morris Finance Ltd v Brown), His Honour restated that the right or remedy of a chargee is the enforcement of the charge by judicial order for sale (with an ancillary order for possession) or the appointment of a receiver (at [36]–[38]). Although the court did not cite the following quote from Morris Finance Ltd v Brown, it provides a helpful explanation of the concept of a charge (at [38]):
The chargee has no self-help remedy… but must obtain the assistance of a court of equity to realize or enforce the charge. Usually, upon default a chargee is entitled to an order for sale, although given that an equitable jurisdiction is being invoked there may be discretionary aspects to the exercise of that jurisdiction.
The requirements to establish an equitable charge, as restated by Derham AsJ in Morris Finance Ltd v Commonwealth Bank of Australia, are as follows:
An intention to create a charge;
If over land, the presence of writing;
The existence of definite ascertainable property, including future property, over which it is contemplated that the charge will exist; and
Consideration (where necessary) (at [39]).
As to the first requirement, there (crucially) needs to be a manifestation by the parties of an immediate intention to charge, and not merely a promise to charge in the future (at [40]).
Doctrine of Merger
The court found that it is well established that where parties to a simple contract later execute a deed for the purposes of carrying out their agreement, the simple contract will be discharged and become “merged” in the deed. His Honour stated that this doctrine will preclude the parties from invoking their previous agreement for the purposes of modifying the later contract (at [49]).
Entire Agreement Clauses
The court observed that entire agreement clauses come in different shapes and sizes. As a general proposition, such clauses are intended to achieve contractual certainty about the terms agreed by the parties and nullify prior collateral agreements relating to the same subject matter (at [75)].
Plaintiff Lessor’s Submissions
The Lessor submitted that all of the requirements for the creation of an equitable charge had been satisfied. It claimed that even a contractual clause which states a party “will charge” property may nonetheless still create an immediate charge.
They also submitted that the doctrine of merger did not apply so as to extinguish the Pleaded Equitable Charge.
As to the operation of the entire agreement clause, the Lessor distinguished the charging clause from the other terms in the Contract to Lease, in that, the charge arose upon execution of the Contract to Lease. Whereas none of the other terms of the Contract to Lease had any effect until the Lease was executed.
It is on the above basis that the Lessor sought declaratory relief and orders, including a declaration that the Pleaded Equitable Charge was granted by the Contract to Lease, that the charge secured payment obligations owed by the Lessee, and the charge attached to the private residential property (at [21]-[25]).
Defendant Lessee’s Submissions
The defendant’s main argument was that the charging clause was not included in the formal Lease. They contended that if the court found that an equitable charge did arise under clause 7.2, the Contract to Lease merged in the making of the Lease (i.e., the Contract to Lease was extinguished). Lastly, it was submitted that the “real completed contract” was to be found in the Lease alone, and the Contract to Lease could not be used to enlarge or modify the Lease (at [26]–[30]).
Court’s Judgement
Was Clause 7.2 Effective to Create the Pleaded Equitable Charge?
The court found that the plaintiff failed to demonstrate the first element identified in Morris Finance Ltd v Commonwealth Bank of Australia and thus did not establish an equitable charge (at [92]). The court reinforced that there needed to be an immediate intention to create a charge and that a statement of future intention will not be sufficient (at [85]). His Honour found that the terms “agree to charge” and reference to “money under the lease” indicated an objective intention that the charge would become effective once the Lease had been executed (at [87]). In His Honour’s opinion, in the circumstances where a later instrument replaces an earlier instrument, the significance of the phrase “agree to charge” takes on a “strong flavour of futurity” (at [89]). The court also accorded significance to the subsequent language used in the clause, which referred to the “lease” rather than the “contract”, which was the language used in some other clauses (at [90]). Therefore, it was not intended to be an immediately operative provision.
Did the Pleaded Equitable Charge Continue Following the Execution of the Lease?
If the court was wrong in that conclusion and the Contract to Lease had created the Pleaded Equitable Charge, the question then became – did the charge survive the execution of the Lease (at [98])? His Honour concluded that the real completed contract was the formal Lease itself, which was intended to wholly replace the Contract to Lease (at [119]). In coming to this conclusion, it found among other things that:
The Contract to Lease was a simple contract which was objectively intended by the parties to be overtaken by a formal lease instrument (at [102]);
The charging clause was not incorporated in a schedule which sets out mandatory terms to be incorporated into the formal Lease (at [104]);
The charging clause was not included in the formal lease, and no equivalent clause was included, this omission was of real significance (at [107]);
The Contract to Lease would only be binding until the execution of the Lease (at [108]);
The parties agreed that the covenants in the Lease, once executed, would take priority over the terms of the Contract to Lease (at [109]);
The formal Lease was prepared by solicitors pursuant to a process by which the parties were permitted to include and remove further terms, and the plaintiff – Lessor – had a stronger bargaining and drafting position (at [110]);
No evidence had been adduced to explain the omission of the charge from the Lease (at [111]); and
The Lease incorporated an entire agreement clause (at [113]).
The court also observed that to require the parties to search through the prior, largely superseded agreement would be commercially impractical and likely generate confusion (at [123]). Therefore, the court declined to grant the plaintiff the relief which it sought.
Importance of the Decision
This decision is a reminder that the miscellaneous provisions at the end of an agreement serve a purpose and do inform the court’s interpretation of the agreement.
The decision emphasises the importance of either:
Incorporating the terms of a preliminary agreement or earlier contract in the subsequent more formal agreement; or
Advising the client that certain terms of the preliminary agreement or earlier contract have not been included in the subsequent more formal agreement and taking the client’s instructions in that regard.
It underscores crucial lessons for practitioners involved in drafting commercial contracts, particularly charging and entire agreement clauses. It reinforces the importance of precise contract drafting and cautions practitioners against using language which may indicate a future intention or obligation in a charging clause, as opposed to an immediate intention or obligation.
Expressions such as “agree to charge”, “will charge” or “shall charge” are to be avoided, unless that is the intent. But if an immediate intention to charge is intended, then include additional wording which clearly demonstrates the immediate intention to charge.
Reflecting upon the decision, it should be considered if language such as “hereby charge with immediate effect” should be used to more easily conclude that the charge is intended to immediately come into force and effect.
Given the rights available to a charge holder, the charge itself must strictly comply with the test at law to create a valid charge and ambiguity in a charging clause is likely to be interpreted against the charge holder.
Charges should not be granted lightly. Landowners and grantors often fail to appreciate the powers that the law grants a chargee.
Where land is mortgaged, the mortgage typically requires prior consent of the mortgagee before a charge can be granted. The failure to obtain that consent is usually a breach of the mortgage.
As noted in this decision, where there has been a default, the charge holder can seek an order for the sale of the charged property.
Florida House Releases Property Tax Reform Proposals
On October 16, 2025, House Speaker Perez released a memorandum outlining seven (7) proposals to amend Florida’s Constitution to reform property taxes. As explained by the Speaker: “[i]t is our position that the House does not need to limit itself in presenting one single plan, but instead allow the people of Florida the ability to choose some, all, or none of the proposals on the 2026 ballot.”
Elimination of Non-school Property Tax for Homesteads – HJR 201 by Steele (R) would eliminate all non-school taxes for homestead properties. Property taxes levied by counties, cities, special districts, and water management districts would be paid by non-homestead property owners. The proposal also prohibits reductions in local law enforcement funding. If approved by voters, the exemption would take full effect January 1, 2027. The joint resolution has been referred to three committees.
Phased Out Elimination of Non-school Property Tax for Homesteads – HJR 203 by Miller (R) would eliminate all non-school taxes for homestead properties starting January 1, 2037. To phase out the taxes, over the next ten years, the homestead exemption would increase by $100,000 per year. The proposal also prohibits reductions in local law enforcement funding. The joint resolution has been referred to three committees.
Elimination of Non-School Property Tax for Homesteads for Persons Age 65 or Older – HJR 205 by Porras (R) would eliminate all non-school taxes for homestead properties owned by a person aged 65 or older. The proposal also prohibits reductions in local law enforcement funding. If approved by voters, the exemption would take full effect January 1, 2027. The joint resolution has been referred to three committees.
Assessed Home Value Homestead Exemption of Non-school Property Tax – HJR 207 by Abbott (R) would replace the current $50,000 homestead exemption and replace it with 25% of the value. For example: a homestead with a just value of $400,000 would receive a $100,000 exemption and a homestead with a just value of $10M would receive a $2.5M exemption. The proposal also prohibits reductions in local law enforcement funding. If approved by voters, the exemption would take full effect January 1, 2027. The joint resolution has been referred to three committees.
Property Insurance Relief Homestead Exemption of Non-school Property Tax – HJR 209 by Busatta (R) would provide an additional $100,000 exemption against non-school taxes to any homestead property covered by a comprehensive multiperil property insurance policy, as to be determined in general law. The proposal also prohibits reductions in local law enforcement funding. If approved by voters, the exemption would take full effect January 1, 2027. The joint resolution has been referred to three committees.
Accrued Save-Our-Homes Property Tax Benefit for Non-school Property Tax – HJR 211 by Overdorf (R) would remove the current $500,000 limitation on homestead portability for non-school taxes, portability related to school taxes would still be capped at $500,000. The proposal also prohibits reductions in local law enforcement funding. If approved by voters, the exemption would take full effect January 1, 2027. The joint resolution has been referred to three committees.
Modification of Limitations on Property Assessment Increases – HJR 213 by Griffitts (R) would restructure the current Save Our Homes (3% annually) and non-homestead annual increase limitations (10% annually). For homestead properties, school taxes and non-school taxes will be treated differently. Taxable values for homestead property school taxes will continue to be determined by the Property Appraiser annually and subject to the current 3% annual increase or CPI. For non-school taxes, the Property Appraiser will determine the taxable value every three years and the maximum increase over those three years will be 3% or CPI. Non-homestead properties will still be fully subject to tax on all school taxes. For non-homestead non-school taxes, the Property Appraiser will determine the taxable value every three years and the maximum increase over those three years will be 15%. The proposal also prohibits reductions in local law enforcement funding. If approved by voters, the exemption would take full effect January 1, 2027. The joint resolution has been referred to three committees.
The above House Joint Resolutions have not yet been reviewed by state economists for a potential fiscal impact. Additionally, the House Speaker’s memorandum highlighted the next general bill.
Ad Valorem Taxation – HB 215 by Albert (R) would make to changes in general law. First, it would require local taxing jurisdictions to approve any millage increase by a 2/3 supermajority vote. Second, it would allow newly married couples to combine their accumulated Save Our Homes benefits, instead of being limited to the higher of the two. If approved by the Legislature and Governor, these changes would take effect January 1, 2027. The general bill has been referred to three committees.
Other property tax legislation filed:
Assessments Levied on Recreational Vehicle Parks – HB 39 by Nix (R) and SB 118 by Truenow (R) would clarify that special assessments levied on RV campsites based on a square footage method cannot exceed the maximum square footage of a RV as allowed by Florida law. The House bill has been referred to three committees.
Reduction of Annual Assessment Increase for Homestead Property – HJR 67 and HB 69 by Holcomb (R) would reduce the homestead Save Our Homes annual limitation from 3% to 1.5%. If approved by voters, the exemption would take full effect January 1, 2027. Both the joint resolution and the bill were referred to three committees.
Distribution of Funds to Homestead Property Owners – HB 71 by Holcomb (R) would provide all homestead property owners in the state a rebate check for $1,000. Since Florida has more than 5 million homestead parcels, the state fiscal impact is estimated to exceed $5 billion. The bill was referred to two committees.
Homestead Exemptions – SB 110 by Arrington (D) would clarify the homestead exemption remains for certain estate planning purposes related to creation of a 98 year or more lease, even if the lease terminates upon the death of the lessee. The bill has been referred to three committees.
Maximum Millage Rates for the 2027-2028 Fiscal Year – HB 149 by Chamberin (R) would revert millage rates to the same level as the 2022-2023 fiscal year. The bill would be in effect for one local fiscal year.
It’s still very early for the 2026 Regular Session, which is scheduled from January 13th to March 13th. Only 218 bills have been filed to date.
If you have any questions regarding Florida’s property or any other tax proposals, please contact our team.
“It is our position that the House does not need to limit itself in presenting one single plan, but instead allow the people of Florida the ability to choose some, all, or none of the proposals on the 2026 ballot.” – Florida House Speaker Perez
Real Smart – Construction Costs, Contracts & What’s Market [Podcast]
Spencer Kallick sits down with Ari Shaeps, construction law partner at Allen Matkins, for a deep dive into what’s really driving construction costs, how “what’s market” is determined, and why a well-negotiated contract is the key to real estate success. Ari shares how he negotiated billion-dollar stadium deals in under 60 days, brings unmatched institutional knowledge from coast to coast, and unpacks the realities of tariffs, labor shortages, and buyout savings. This is a must-listen for developers, investors, and anyone navigating construction in today’s volatile market.
Ground Leases and Leasehold Condominiums: Structuring Development When Land Can’t Be Conveyed
When a developer encounters a landowner unwilling—or unable—to convey fee title, the project doesn’t have to stop. In Texas and other jurisdictions following the Uniform Condominium Act, the leasehold condominium provides a practical and financeable alternative for structuring mixed-use, residential, or public-private developments on long-term ground leases.
Why Developers Are Turning to Leasehold Condominiums
Public institutions and private landowners often face legal or strategic reasons for retaining ownership. State universities may be required by statute to hold title, and family trusts may prohibit conveyance of legacy land. A properly drafted ground lease coupled with a condominium declaration can unlock the value of that land while preserving ownership and enabling project financing.
This approach has gained traction as mixed-use and vertical communities have become mainstream and financeable. The structure allows each use—hospitality, retail, residential, or institutional—to be separately owned, operated, and financed, even when all sit atop leased land.
Legacy Leases vs. Ideal Leases
In practice, developers encounter two very different lease scenarios when pursuing a leasehold condominium structure:
The “Ideal Lease” is one drafted from the start with the condominium in mind. The ground lease anticipates submission to a condominium declaration, includes long-term stability (typically 50–99 years), and allocates obligations—such as rent, insurance, and maintenance—in a way that can be fractionalized among future unit owners. It provides a smooth path for recordation and financing and fits comfortably within the Texas Uniform Condominium Act (TUCA).
The “Legacy Lease,” by contrast, is already in place—often negotiated for a single ground lessee long before any condominium concept existed. The developer, already holding the ground lease, later decides to impose a condominium structure to create diversity of ownership within the leasehold estate. This is common when a ground lessee wants to sell or finance discrete components (e.g., residential, retail, or office units) without transferring fee ownership.
Legacy leases present challenges:
Their provisions were not written with multiple owners or a condominium association in mind.
Obligations like insurance, maintenance, and rent are unitary—intended for one tenant—and must be carefully fractionalized or reassigned.
Many legacy leases require lessor consent to submission under a condominium declaration and may contain terms that conflict with TUCA’s disclosure, insurance, or termination provisions.
Reconciling these conflicts requires careful drafting and negotiation to satisfy lenders, insurers, and title companies while preserving the lessor’s core protections.
Developers using a legacy lease must undertake significant legal and structural coordination—often referred to as “harmonizing” the lease and the declaration—to ensure that the condominium is both compliant and marketable.
Key Drafting and Business Considerations
Developers must align two complex instruments—the ground lease and the condominium declaration—with the Texas Uniform Condominium Act.
Term alignment: The condominium’s life ends when the ground lease expires, so a 50- to 99-year lease term is typical to ensure financeability and market acceptance.
Rent allocation: Ground rent can be apportioned among condominium units as assessments collected by the association or as direct payment obligations of each unit owner.
Insurance and casualty: TUCA’s mandatory insurance requirements must be synchronized with the lease to avoid conflicts between the association’s and lessor’s obligations.
Unit-level enforcement: TUCA limits a lessor’s remedies—protecting compliant unit owners even if another owner defaults—thereby converting a binary landlord-tenant relationship into a multi-owner regime under one lease.
Balancing Developer and Landowner Interests
Section 82.056 of the Texas Uniform Condominium Act provides market protection: once the condominium is recorded, the lessor cannot terminate a compliant unit owner’s leasehold interest for another party’s default. This statutory safeguard, together with careful drafting, makes leasehold condominiums a viable tool for projects requiring long-term stability and lender confidence.
The Bottom Line
For developers working with landowners who cannot or will not convey fee title, a leasehold condominium can transform a ground lease into a marketable, financeable, and saleable real estate product. The key is harmonizing the ground lease and condominium declaration to allocate rights and obligations among multiple parties—turning what begins as a constraint into a flexible ownership platform that benefits both developer and landowner.