Contracts generally; leases

# A.

Examples of contracts and leases taxable under § 58.1-807 of the Code of Virginia:

# 1.

The assignment of an overriding royalty interest. The term "royalty interest" generally refers to a right to share in the production of oil and gas at severance; it is personal property and relates to the proceeds from oil and gas leases if and when there is production. A "royalty" is not realty but personalty and a contract entirely separate and distinct from the oil and gas lease, which contract requires the owner of the interest in realty to share a portion of the royalty with another. The royalty interest does not run with the land.

# 2.

The recordation tax under § 58.1-807 of the Code of Virginia on options is measured by the consideration given for the option and not by the value of the property involved.

# 3.

An agreement not to encumber or transfer property is a contract relating to real property. The tax would be imposed upon the unpaid principal and interest of the note or notes.

# 4.

An amended lease which increases the original monthly payments. The tax is based on the difference or the increase in the monthly payments.

# 5.

A lease and a contract of sale when both agreements are contained in a single document. This type of document contains more than one type of contract, and the recordation tax is imposed upon each contract; i.e., the lease and the contract of sale.

# B.

Example of contracts and leases not taxable under § 58.1-807 of the Code of Virginia:

1. An assignment of a lease on which the recordation tax has been previously paid is generally not subject to tax under the provisions of § 58.1-807 of the Code of Virginia if there is no increase in the amount of the principal obligation.