Anyone have experience selling a deeded parking spot?

Question

Hi all,

Hoping to get some info on how selling a deeded parking spot works. My wife and I own a condo in San Francisco that comes with a deeded parking spot. Someone in the building inquired to purchase the spot. They're planning to use a title company to finalize the transfer and we've confirmed HOA is OK with proceeding as well.

Specifically, my questions are...

1. How do capital gains work for this type of sale? My wife and I lived in the unit for 2 of the past 5 years. Does the capital gains tax exemption work when selling a *piece* of your property -- in this case, the deeded parking spot? What would happen if we proceeded to sell the condo in a year or two?

2. Will selling the parking spot affect my current mortgage in any way? I'm assuming documents will get recorded at the county level and our deed will change. Does this trigger anything with our current lender?

3. How would my property taxes change going forward? I believe I would need to get a re-assessment done by the city and then, if approved, my property taxes would get reduced based on the new assessed value.

Amit M. · Answer

@Cliff T. I don’t understand how you can legally separate the parking spot without redoing the building’s CC&R’s. The HOA is willing to do that? What did the HOA tell you the process will be for that? My intuition is telling me that unless the HOA has a clear process in place, this will be way more of a PITA than it is worth.

All 3 of the questions you brought up are important ones, and there are no clear answers (yet.) The mortgage issue is funky because if you ask them specifically, you run the risk of them calling in the note. If you just do it, there is a chance that they will never know about the “partial” sale, but then you’re at risk in the future. As for property taxes, your assessed value is based on your purchase price. Again, not sure how SF’s assessors office will view that, but I can almost guarantee you that it will be a PITA dealing with them! For the $75-100k you’re selling(?) the spot for, I’m not sure that it’s worth the hassle.

At the end of the day I agree with Tatyana and just rent it out for the $250-350/month you can probably get for the thing. There are more and more new condos being built in SF without parking. So the value of that spot has a bright future imo, as less condos overall will offer parking.

Keep us posted on this. Cheers

Cliff T. · Answer

@Natalie Kolodij - I'm not sure if the city/ county taxes me separately for the spot. I don't believe so. My understanding (based on a call to the assessor's office last week) is they almost always take purchase price and multiple by 25-30% to get the split between building and land value, so my parking spot "value" is bundled in that breakdown and has the same split as my actual condo.

Steven Hamilton II · Answer

If they are part of the same area/structure or building I'd consider it. To add to @Natalie Kolodij's example you are using it as part of your home.

§1.121-1(e)

(1)Dwelling unit definedFor purposes of this section—(A)In general

The term “dwelling unit” includes a house, apartment, condominium, mobile home, boat, or similar property, and all structures or other property appurtenant to such dwelling unit.

Mindy Jensen · Answer

I'm following this because I've never heard of this before.

Tagging @Natalie Kolodij and @Linda Weygant to see if they can answer, or bring in anyone else who knows how this works.

Ronald Boccio · Answer

Any updates? I'm in a similar situation in NJ/NY area to the OP. A neighbor around the block offered to purchase my garage parking spot. The spot is on one deed with my apt however i believe that can be separated rather easily. I too would like to know the capital gains ramifications in terms of if the exclusion can be used. The parking spot is a totally different tax lot than my unit and i also pay a separate HOA on the spot. So i believe i would just need to amend the deeds from 1 to 2 and sell the spot with its newly created deed to the buyer.

I believe the mortgage wouldn't change since it was created on the initial purchase (one deed). Would a refi need to occur on the new single apt deed?? I would just take the tax assessors value and apply it back to the mortgage as principal and thus effectively making it as if i purchased the unit without the spot for x amount less and bank/invest the additional proceeds.

Maybe the more important question is, is it even worth selling the spot or just keeping it and renting it out? I plan to keep the unit into retirement as rental income. Cash now to pay down mortgage and invest for future vs higher rental income and potential increase in property/spot value over the next 30 plus years.

Tax assessor value $30k, Offer $75k, rents for 300-350 a month by itself or boosts apt rental value by the same.

Cliff T. · Answer

Bumping this thread up to see if anyone has direct experience selling a deeded parking spot. Would love to better understand the potential tax ramifications (both property taxes and capital gains tax exclusion) and how/if my current mortgage may be affected.

Tatyana Shevnina · Answer

@Cliff T.  -- why not just rent the parking out?  It seems that selling it will ultimately diminish the value of the condo.  I rent out a condo in SF that has a parking spot. Sure, when I lived in it, I didn't use my car most of the week. Still, I wouldn't sell it given the parking shortage and prevalent car burglaries.

Eamonn McElroy · Answer

"how do we determine that a parking spot meets the requirement of being part of a dwelling unit when separately deeded?"

The definition of a dwelling unit under 280A(f)(1): The term “dwelling unit” includes a house, apartment, condominium, mobile home, boat, or similar property, and all structures or other property appurtenant to such dwelling unit.

Merriam-Webster:

Definition of appurtenant 2: Auxiliary, Accessory

Definition of accessory 1a: an object or device that is not essential in itself but adds to the beauty, convenience, or effectiveness of something else

Deeds don't matter.  Don't focus on that.  Don't look to the -1(e) reg either, that's inapplicable if OP is using the parking space for normal personal use.  Under the -4(e)(1) reg, interests matter.  Specifically, interests in dwelling units.

"So I guess if we're piggybacking on 280a definition"

What other definition of dwelling unit would you have us use other than the 280A(f)(1) definition?

"It specifically disallows other buildings with regard to a sale of 121 treatment mentioned as well"

Quite the opposite.

The term “dwelling unit” includes a house, apartment, condominium, mobile home, boat, or similar property, and all structures or other property appurtenant to such dwelling unit.

Regardless, OP should consult with a tax professional before taking any tax position, especially this one.  Disclosure may be required.  I'm sure we don't have all of the facts, and no one has had the deep conversation.

Natalie Kolodij · Answer

So I guess if we're piggybacking on 280a definition-

It specifically disallows other buildings with regard to a sale of 121 treatment mentioned as well

Anyone have experience selling a deeded parking spot?

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