Selling a Commercial Building in North Jersey: Transfer Fees, the 1031 Exchange and a $7.25M Case Study

Why owners are asking now

In New Jersey, "commercial real estate appraiser near me" and "commercial real estate inspector" both became breakout searches over the past 90 days, and "commercial real estate for sale" rose 80%. Owners are testing what their buildings are worth. The answer starts with what the building earns and what comparable buildings have actually sold for, and it ends with what you keep after fees and tax.

State fees depend on the property class

The Realty Transfer Fee applies to every conveyance of real property in New Jersey unless an exemption applies. The Graduated Percent Fee (1% to 3.5% of the whole price over $1 million, paid by the seller since July 10, 2025) applies only where the property is classed as Class 2 residential, Class 3A farm with a residence, Class 4A commercial other than industrial or apartment, or Class 4C cooperative units.

That means an industrial building sells without the Graduated Percent Fee, while a retail or office building over $1 million pays it. Form RTF-1EE, the affidavit for the fee, must be attached to every commercial property transfer. Selling the entity instead of the building does not avoid it: New Jersey's Controlling Interest Transfer Tax, imposed on the seller, applies to the transfer of a controlling interest in an entity that owns Class 4A commercial property. It applies when the property's value is over $1,000,000, and a seller who pays the Graduated Percent Fee on the deal is exempt from it. Talk to your attorney before structuring a sale either way.

The 1031 exchange: deadlines that do not move

Under Internal Revenue Code Section 1031, when you exchange real property held for business or investment for other like-kind real property, you generally do not recognize gain. Since 2018, Section 1031 applies only to real property. Real properties are generally like-kind regardless of whether they are improved or unimproved, but U.S. property is not like-kind to property abroad. Cash or other property you receive is taxable to that extent.

In a deferred exchange, the replacement property must be identified within 45 days after you transfer the property you are giving up, and received within 180 days or by the due date of your tax return including extensions, whichever is earlier. The exchange is reported on IRS Form 8824. Line up a qualified intermediary and your replacement search before you sign a contract, because day one is the closing.

An exchange timeline

Counted from the day you transfer the property you are giving up:

Forms at closing for an LLC or corporation

A corporation, partnership or multi-member LLC, resident or not, completes and signs Form GIT/REP-3 at closing, checking the box that the seller is not an individual, estate or trust. With that exemption properly claimed, no estimated payment form is filed, and the Division confirms a corporation does not pay the 2% nonresident withholding. Individuals who own commercial property in their own names and live outside New Jersey do; see selling in New Jersey and moving out of state.

Case study: 5 Mars Court, Montville

5 Mars Court is a 34,500 square foot industrial building in the Mars Court park in Montville, suited to light manufacturing, warehousing and distribution, with 3,900 square feet of office space, ceilings from 15 to 24 feet, updated HVAC, LED lighting and parking, minutes from Routes 46, 80 and 287.

Slava listed it at $7,495,000 and represented the seller. It closed on February 14, 2025 at $7,250,000, or $210 per square foot. See the sale and the commercial division.

Before you list a commercial property

Have these ready before you test the market:

• A rent roll and leases, with expirations and options.
• Two to three years of operating income and expenses.
• Any environmental reports, surveys and certificates of occupancy.
• Your tax position: basis, depreciation taken, and whether you will exchange.
• The property's tax class, which decides the Graduated Percent Fee.