A buyer and seller in New Castle County, Delaware enter into a purchase agreement for a residential property at $400,000. The agreement is silent on the allocation of the realty transfer tax. Three days before closing, the seller demands that the buyer pay the entire combined transfer tax. Which of the following best describes the legal and practical outcome under Delaware law?
Correct Answer
A) The combined transfer tax is split equally between buyer and seller by established Delaware convention, but the parties may negotiate a different allocation
In Delaware, when a purchase agreement is silent on the allocation of the realty transfer tax, the established convention — and the default expectation in standard practice — is that the combined tax is split equally (50/50) between the buyer and the seller. However, this is a negotiable term, and parties are free to contractually allocate the tax differently. Neither party is legally compelled to pay the entire tax by statute when the contract is silent; the 50/50 split is a practice convention, not a mandatory statutory rule. The seller's last-minute demand to shift the full tax to the buyer would not be enforceable if the contract is already ratified and silent on the issue, as the default convention applies.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Consideration is something of value exchanged between parties to a contract, making the agreement legally binding. It can be money, a promise to act, a promise to refrain from acting, or anything else of value.
Contingencies are conditions written into a real estate contract that must be met before the transaction can close. If a contingency is not satisfied, the buyer can typically cancel the contract without penalty.
Contract termination occurs when a contract is ended or discharged, releasing both parties from their obligations. A contract can be terminated through performance, mutual agreement, operation of law, or breach.
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