Is the county trying to pull one over on me?
May 30, 2007 7:01 AM   Subscribe

Can you owe property tax on a house for the year before the purchase?

I bought a house in May of 2005 that I'm currently trying to unload for a move. Recently I found out that the county is pegging me for not paying 2004 property tax. I didn't live in the county in 2004, didn't even live in the state that year. Is this legal? Is it a case where they tried to get their 2004 tax out of the prior residents, failed, and now am sticking me with the bill?

I'm in Ohio if that makes any difference.
posted by the dief to Home & Garden (18 answers total)
Try calling them to discuss this. I hope it could be cleared up with proof of when you bought the house.
posted by grouse at 7:07 AM on May 30, 2007

did you list your new address on your 2004 tax return? when i moved to nc in january 2003 and submitted my 2002 taxes with the new address, i eventually got a letter saying i owed state taxes for 2002. a single call to the number on the letter cleared it up.
posted by noloveforned at 7:09 AM on May 30, 2007

I don't see how this can be the case. When I did the closing for my house, part of the taxes were to be paid by the previous owner, and the remainder by me, split according to how long we had each owned the place for the tax year. I'm in Canada.
posted by chunking express at 7:10 AM on May 30, 2007

Response by poster: grouse, I haven't talked to them directly but my wife has. She says that they say we're stuck with it and that we didn't live here doesn't matter, for some reason. I'll call them myself, but I wanted to be armed with some information before I went ahead.
posted by the dief at 7:10 AM on May 30, 2007

She says that they say we're stuck with it and that we didn't live here doesn't matter, for some reason.

Well, whether you lived there likely doesn't matter. But the fact that you didn't own the house does. You should emphasize that when you call them again. If they say that you still have to pay, ask why they think that. Ask to talk to the manager if the first person you talk to can't give you an articulable reason.

Having strangers on the internet guess why they think you owe taxes from that year is less likely to be fruitful.
posted by grouse at 7:15 AM on May 30, 2007

Not a Tax expert, but having recently bought a place myself I can tell you what we learned. (we're in Chicago).

Like you we received a tax bill for the year we did not live there. In Cook County, taxes are by the Lot...not by the owner, so the county doesn't care WHO is in it...just that someone forks over the cash. It would be more fair if it were paied by the previous owner, but unless you arranged that before hand, I'd think you may be somewhat out of luck.

For instance. we had, as part of our closing, collected money from the previous owner that was put in escrow to cover the estimated cost. (Since the settling of property taxes are retroactive to the last year...kind of like Income taxes...we didn't know how much it was going to be. Our lawyer dickered with the seller's lawyer until they arrived at a sum). When the tax was due, we sent it over to our Bank who manages the escrow and they paid it.
posted by Wink Ricketts at 7:27 AM on May 30, 2007

Speaking of guesses- mine is that property taxes should have been cleared up at settlement when you bought the house. That sort of thing should have been noticed by a title search.
If it wasn't, then you may have bought the tax liability along with the rest of the house.
posted by MtDewd at 7:29 AM on May 30, 2007

Did you take out title insurance when you bought the house? If so, the insurance should cover this.

In most places the property taxes are a lien on the property, so whoever owns the property is holding the bag.

chunking express, what you describe is a contractual arrangement between you and the previous owner. If they hadn't paid, you would have had to pay the tax and the contract would allow you to take the previous owner to court to recover the money. (I'm in Toronto)
posted by winston at 7:40 AM on May 30, 2007

Response by poster: Man, this sucks in large amounts. But thanks everybody for the responses.
posted by the dief at 7:47 AM on May 30, 2007

Property taxes follow the property, not the individual. Unpaid property taxes are basically a lein against the property, meaning the county will put your house up for auction eventually if they don't get their tax money.

If you closed on your house through a title company and title insurance was purchased, the title company should have turned up any back taxes due in a title search. These back taxes would have been paid by the seller to the title company at closing, and the title company would have paid the county. Either this has gotten screwed up somehow, or the title company failed to do a through title search -- this is where the title insurance comes in. Call the title company, they should take care of it. Make sure you get something from them showing that it has been taken care of.

If you closed on your house without using a title company (maybe you bought your house from a relative, or maybe you bought your house from some guy who convinced you not to use a title company), you are stuck with paying the taxes. The county does not care where you lived or whether you owned the property at the time.
posted by yohko at 7:56 AM on May 30, 2007

Seconding contact with the title company. This is most likely covered under the title policy you (hopefully) bought when you purchased the home. They will be able to track the ownership during the tax year and properly report who the owners were at that time. 99% of the time, the property taxes are paid by the seller when the property is sold.

You didn't happen to buy this property from a distressed seller, did you? If the property was in foreclosure or sold at auction, there is a chance that the seller was not in a position to pay the taxes.
In any case, if you did not own the property during the year in question, the taxes would not be your responsibility.
Sounds like a reporting error. Good luck.
posted by Carnage Asada at 8:41 AM on May 30, 2007

If the previous owners owed tax, their debt might run with the land. The local government would rather deal with a local landowner even if they've done nothing wrong, than a former owner who could be anywhere. If the previous owners really did owe the tax, it should have come up during closing. It might be worth contacting the lawyer you worked with for the purchase.
posted by the christopher hundreds at 9:01 AM on May 30, 2007

Or on multi-hour lack of preview, what everyone else said...
posted by the christopher hundreds at 9:05 AM on May 30, 2007

Did you take out title insurance when you bought the house?

Wait, not taking out title insurance is even an option?
posted by oaf at 10:30 AM on May 30, 2007

Wait, not taking out title insurance is even an option?

(In some situations, yes.)

IANAL, but a residential real estate paralegal in New York State. I agree with all the umpty-squillion people who said this should've been dealt with at closing.

It wasn't, so no use crying over that part of it.

Check all the paperwork you (or your attorney, if you used one) may have received. See if there's any sort of guarantee from the seller or the seller's attorney promising to bring the taxes current.

Make sure it's not you that actually owes the taxes (in NYS, school property tax bill year runs from July to June, but it's called by the previous year's name - if you bought a house in May '05, for example, you might owe from May-June '05 on the "2004 tax bill").

If Ohio uses the HUD-1 form (which lists all the expenses of the buyer and the seller), see if there is any sort of money taken out of the proceeds for the payment of these taxes (it's possible that the money was held and just never paid).

Definitely bring it up to any attorney who was involved in the matter - whether it's yours, the attorney for the seller, or any attorney who might have represented the mortgage company.

(And keep us posted - I'm curious to find out how this happened in the first place...)
posted by Lucinda at 11:23 AM on May 30, 2007

Fifteenthing that this should have been resolved at closing. A relevant article I read a few months ago:

Insurance Untangles Ownership
Hot Market Has Created Rise in Title Problems

A friend who has worked in closings has told me tales about fucked-up closings you wouldn't believe. There isn't anyone running the closing, just several parties who all seem to think -- these days -- that "somebody else" took care of one thing or the other. There are people who show up to closings without a cashier's check. ("What, this is the time we pay?" "Doesn't the bank bring the money?" "Can't you just move it from one account to the other?")

Apparently, in the old days, your "banker" took care of these things, when bankers were Cary Grant. Nowadays they're "customer service representatives".

So, caveat emptor: you need to be running your own closing. Follow up with everyone. Make sure each person to attend is ready. Know what questions to ask, because in this case, an assumption can be ex. pen. sive.
posted by dhartung at 2:20 PM on May 30, 2007

Apparently, in the old days, your "banker" took care of these things, when bankers were Cary Grant. Nowadays they're "customer service representatives".

Erm, well this is sort of right.
There are people running the closing Nowadays, the "bankers" are either closing attorneys or escrow people, depending on which side of the country you live on. Following up with everyone may not be humanly possible, so sometimes leaving closings to the experts is advisable. YMMV.
posted by Carnage Asada at 3:09 PM on May 30, 2007

Not to derail, but...

"Wait, not taking out title insurance is even an option?"

Selling title insurance is a crime in Iowa. The Iowa Supreme Court (and the legislature) think it's a scam, at least in states with sensible recording/title transfer system:

"The Iowa Supreme Court has characterized title insurance as an “invidious form of business.” See Chicago Title v. Huff, 256 NW 2nd 17 (Iowa 1977). This is because in most instances, title insurance companies incur a zero loss ratio for their products in the State of Iowa. In other words, they collect millions of dollars in premiums yet pay out virtually nothing in losses."

From the Post's fellation of the title-insurance industry: "From 1999 to 2004, the amount of claims paid out by the industry doubled, to $700 million -- but revenue brought in also roughly doubled, to $16 billion. Generally, the industry pays out 4 to 5 percent of premiums to settle claims."

To give some perspective, the national average claim to premium ratio for car insurance is over 60% and the New York City comptroller calls NYC's payback of 48% "highway robbery" (scroll down about 1/3 the way). Title insurance is just another add-on expense to buying a house. It's a filthy practice laden with kickbacks to realtors, mortgage brokers, and other hangers-on with very little value to homeowners who conducted a proper title search. Other states would do well to clean up their system of title transfer and ban the practice, too.
posted by the christopher hundreds at 10:34 PM on May 31, 2007

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