Whether property is considered "residential real property" can have important New York State and City transfer tax consequences. First, the New York City real property transfer tax is imposed at the rate of 1.425% on conveyances of "one, two or three family houses, and individual residential condominium units" (or 1% if the consideration is $500,000 or less) and at the rate of 2.625% for most other types of property (or 1.425% if the consideration is $500,000 or less).

Second, New York State imposes an additional real estate transfer tax on the transfer of a "one, two, or three family-house, an individual condominium unit, or a cooperative apartment unit" where the consideration is $1 million or more (colloquially referred to as the "mansion tax"). The tax is generally imposed at the rate of 1%, although higher graduated rates apply to properties located in New York City. Thus, the sale of a single residential condominium unit would result in higher New York State transfer tax but lower New York City transfer tax when compared to the sale of commercial property of comparable value.

Although both the New York State and New York City statutes use almost identical language, the two jurisdictions take conflicting positions with regard to bulk sales of residential condominium units. New York State takes the position that a sale of multiple residential condominium units by a single grantor to a single grantee is subject to the mansion tax (although each condominium unit is considered separately in determining the applicable rate and whether the $1 million threshold has been exceeded).