Replacement Property Identification

The written identification notice is the document that names, in specific and unambiguous terms, which replacement properties a New York City exchanger may close on. It has to reach the qualified intermediary by midnight on day 45 after the relinquished property closes, and it has to comply with one of three identification rules described below.

Choosing Among the Three Identification Rules

The three-property rule allows naming up to three replacement properties regardless of their combined value. The 200-percent rule allows any number of properties as long as their combined fair market value does not exceed 200 percent of the relinquished property's value. The 95-percent rule allows identifying more properties than either limit permits, but only if the taxpayer actually acquires at least 95 percent of the total value identified.

Because a single New York City building or condominium unit can represent most of a sale's proceeds, exchangers here use the three-property rule far more often than the 200-percent rule, which caps out quickly once even a second candidate is added. We compare all three rules against the taxpayer's actual candidate list before recommending which one governs the written notice.

What the Written Notice Has to Include

A valid identification notice names each property with enough specificity, generally a legal description or street address, that there is no ambiguity about which property is being identified. Verbal identification or a broad description of a property type does not satisfy the rule.

Full property address or legal description for each candidate
Signature of the taxpayer and delivery date
Delivery to the qualified intermediary, not merely internal notes
Ranking or notes on backup candidates, kept separately from the formal notice
A copy retained in the exchange file for the taxpayer's CPA

We proofread the address and legal description on the notice against the actual title report before delivery, since a typo or an outdated lot description can create an ambiguity argument later if the exchange is ever questioned.

Building the Candidate List Before Day 45 Arrives

We start compiling candidates as soon as the relinquished property is under contract in New York City, rather than waiting for the closing date to start the clock. That gives time to pull lease abstracts, rent rolls, or Certificate of Need status depending on the asset class, so the properties named in the notice are ones the taxpayer can actually close on.

A backup candidate is worth carrying even after a primary choice looks strong, since New York City deals can slip on title issues, financing, or a seller's change of terms with little warning inside the window. We keep at least one backup candidate active through day 45 on every exchange we coordinate, regardless of how confident the primary choice appears.

The candidate pool typically spans several boroughs rather than staying inside one: a Manhattan seller might identify a Brooklyn multifamily building as a primary candidate, an outer-borough industrial parcel in Queens or the Bronx as a backup, and a Staten Island or regional net-lease alternative as a third option in case both closer candidates run into title or financing delays. Comparing candidates across boroughs and asset classes side by side, rather than searching one submarket at a time, tends to produce a stronger three-property list by day 45.

What Happens After Identification

Once the notice is delivered, the taxpayer generally cannot add new properties or revoke and replace named candidates after day 45, except within narrow limits allowed before the deadline itself. The remaining work shifts to closing on the identified property or properties within the 180-day exchange period, coordinating financing, title, and the qualified intermediary's fund release in that order.

We keep a closing punch list for each identified property active through day 180, tracking financing contingencies, title exceptions, and any remaining seller deliverables so the exchange does not stall in the final weeks of the window.

The closing budget from this point forward should already reflect the combined New York City and New York State transfer-tax stack on the acquisition side, since that cost reduces the cash available for closing adjustments, reserve funding, or any last-minute repair credit negotiated with the seller. We confirm the transfer-tax estimate against the actual closing statement as each identified property nears its closing date, rather than relying on the estimate used earlier in the sourcing process.

Common 1031 Exchange Questions

Can a New York City exchanger change the identification notice after day 45?

Generally no. Revocations and amendments to the identification list are only allowed before the 45-day deadline passes. After day 45, the taxpayer is limited to closing on properties from the original notice, which is why the candidate list should be finalized with care rather than rushed at the last minute.

Which identification rule is used most often for New York City exchanges?

The three-property rule is the most common choice here, since New York City property values often mean a single candidate or a small handful of candidates already represent most of the exchange proceeds, making the value-based 200-percent rule harder to satisfy.

What counts as specific enough identification under the rules?

A street address or a legal description is generally sufficient. Identifying a property type or a general area without naming an actual parcel does not meet the requirement, so a notice that says only apartment building in Queens would not be valid.

Can more than three properties be identified if their combined value is small?

Yes, under the 200-percent rule, any number of properties can be named as long as their combined value does not exceed 200 percent of the relinquished property's value, which can suit an exchanger spreading proceeds across several lower-priced assets.

What happens if the identification notice is delivered a day late?

A late notice generally does not satisfy the safe harbor identification requirement, which can disqualify the exchange. We build in buffer time so delivery to the qualified intermediary happens before the deadline, not on it, treating the actual deadline as a hard stop rather than a target.