Fisher Law Corporation’s Frequently Asked Questions

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Notice: The information contained in these articles is designed to provide accurate information in regard to the subject matters covered and is made available with the understanding that the information provided does not constitute the rendering of legal or professional services. All information is of a general nature, is specific to California law only, and is not intended to to replace professional or legal advice. Each person’s situation is unique and the information contained herein cannot be applied to any individual’s situation. If legal advise is required, the services of a professional should be sought.


What is an all-inclusive deed of trust? »

What is CERCLA? »

How does a condominium differ from a house? »

What are Covenants that run with the land? »

What is a deed in lieu of foreclosure? »

What are easements? »

What are Encroachments? »

How does escrow work? »

What is fire and flood insurance? »

How do foreclosures work? »

What are the different forms of doing business? »

What do trade terms mean? »

What are liquidated damages in real property contracts? »

What is a Lis Pendens? »

How do loan modifications work? »

What is a Mechanic’s Lien? »

How does a Multiple Listing Service work? »

What is an off-shore trust? »

How do real property taxes work? »

What is Procuring Cause? »

What is a Quitclaim Deed? »

What is RESPA? »

Who bears the risk of loss during escrow? »

What are second deeds of trust? »

What is the Statute of Frauds? »

What is Statute of Limitations on Debts Secured By a Mortgage? »

Does a buyer’s broker have a duty to inspect? »

What is The Parol Evidence Rule? »

What is Adverse Possession? »

 


Q. How do real property taxes work?

A. The general revenue of a city and county is collected by a tax on all non-exempt real property within the jurisdiction of the taxing agency. The full cash value of the real property is assessed annually, and the assessment valuation is used to fix the tax rates.

Land and improvements are assessed separately. Where both land and improvements are owned by the same person, the taxes due for both are a lien on the land. Where the land and improvements are owned by separate persons, either owner may file with the assessor a statement of his separate ownership before the lien date, and the land and improvements must then be separately assessed against the respective owners. The tax due for the value of separately owned improvements may be carried on the unsecured tax roll or it may be carried on the secured tax roll and become a lien on other real property owned by the owner of the improvements.

The assessment is based on the full cash value of the property on the date of the assessment. The assessor is required to consider restrictions against the property, such as zoning and development restrictions, when determining the value of the property, and possibly private use restrictions. The property is re-appraised and re-assessed to the full cash value of the property upon a change of ownership, or upon the completion of new construction, and the taxes are recalculated for the next payment date.

Unless otherwise provided, taxes and all penalties and collection costs become a lien on the assessed property on the first day in March next preceding the fiscal year for which the taxes are levied. For example, the lien date for the fiscal year from July 1, 1988 to June 30, 1989, would be March 1, 1988.

The actual levy of the assessment occurs after the lien date. To “levy” a tax means to fix the tax and apportion it among the properties. The levy is based on the value of the property on the lien date. It usually is impossible to determine the amount of taxes due on the property on the lien date, but the actual levy of the assessment several months after the statutory lien date does not alter the effective date of the lien. When the amount of the tax is determined after the assessment, it relates back to the lien date.

The taxes are payable by halves, one half on November 1 and the other half on February 1 of the following year. Both installments can be paid when the first payment is due, and the payments due for one year can be paid even though a prior year’s taxes have not been paid, but the second installment of one fiscal year cannot be paid if the first installment of the same fiscal year has not been paid. Also, the tax collector cannot accept a tender of a partial payment of an installment of taxes due. All taxes for personal property on the secured roll are due on November 1.

The installments become delinquent when not paid on or before December 10 and April 10, respectively. There is a penalty of ten percent on delinquent taxes, and if the taxes are transferred from the secured to the unsecured roll and they are delinquent for two months, an additional penalty is imposed in the sum of one and one-half percent per month.

The effect of a tax lien is similar to a judgment against the property owner with an execution levied against the assessed property. As a general rule nonpayment of the taxes can be enforced only by foreclosure of the tax lien, and the taxpayer is not personally liable for payment of the taxes. The taxing agency cannot impose personal liability on the taxpayer other than by a sale of the assessed property. However, there are two exceptions to this general rule. The taxes may be transferred to the unsecured rolls and collected from the taxpayer personally without foreclosure of the lien when (1) the value of the property secured by the lien is not sufficient for the amount of taxes due, or (2) the property is transferred to a government agency because the lien cannot be enforced against the grantee.

The tax collector publishes a “notice of pending default” for the failure to pay taxes when the taxpayer fails to pay the taxes when due, on or before June 8 of each year. Also, the tax bill on property that has been “tax-defaulted” contains a note that the prior year taxes are in default. The notice that is published describes the default and contains a notice of the right to redeem and that a notice of all tax-defaulted property will be published on September 8 unless there is a redemption. Each year, on September 8, the tax collector publishes an affidavit listing all tax-defaulted property which describes the property, the right of redemption, the name of the assessee, and the amount of the default.

On or about June 30, at the time fixed in the publication of the “notice of impending default,” the unpaid taxes are declared in default “by operation of law” and by the declaration of the tax collector. This declaration commences the five-year period of redemption. The tax collector gives a notice of all tax-defaulted property to the Comptroller, who records the notice.

After property has been tax-defaulted, it is a misdemeanor to do any act tending to impair the value of the property permanently, including the removal or destruction of improvements or the cutting of timber, and the party committing such acts is liable for damages to the taxing agency.

Tax-defaulted property can be redeemed at any time until the right of redemption is terminated by paying the amount of defaulted taxes, delinquent penalties and costs, a redemption fee, and redemption penalties of 1.5 percent per month. The right of redemption is terminated when the property is sold. In order to redeem, the payment must be received by the tax collector prior to the completion of the sale. A redemption which is offered by a third person who does not have any interest in the property, which is accepted by the tax collector, accomplishes an effective redemption, even against a person who buys at the sale, but the redemption inures to the benefit of the owner.

Five years or more after the property becomes tax-defaulted, the tax collector has the power to sell all or any portion of it that has not been redeemed. The tax collector is obligated to sell the property within two years thereafter unless there are no bids at an attempted sale, in which event he must attempt successive sales at intervals of no more than four years. The tax collector may offer the property for sale to contiguous owners if the property is unusable because of size, location or other conditions.

When property has been tax-defaulted for five years, and the tax collector proposes to sell the property, a nonprofit organization can object to the sale of residential or vacant property if it agrees in writing that it will rehabilitate the improvements, or construct a residential dwelling on the vacant land, for sale to low-income persons or for dedication to public use. In such cases, if approved by the board of supervisors, the property can be sold without public auction to the nonprofit organization at the minimum bid prescribed by the board.

The assessee must receive notice by registered mail at least 45, and not more than 60, days prior to the date of the sale. Also, all or any portion of property which is tax-defaulted for more than five years can be purchased by the state, county, revenue district or redevelopment agency; any such entity can purchase all or a part, or a fee title or an easement.

On June 8 of each year the tax collector publishes a “notice of power and intent to sell” all property that has been tax-defaulted for five years or more on the date specified for the sale. After the first publication, not less than 21 or more than 35 days before the power to sell arises, the tax collector sends a notice of default and power to sell the property for nonpayment of taxes by registered mail to the last assessee of the tax-defaulted property at his last known address. The tax collector must make a reasonable effort to locate the address of the last assessee (but a failure to make this effort does not affect the validity of the sale). The notice of sale is also recorded.

Prior to the sale, notice also must be given to persons who have an interest in the property, which notice includes information regarding the amount necessary to redeem, the priority of the interests to claim any excess sales proceeds, and the minimum bid. The notice is sufficient if the tax collector makes a reasonable effort to determine the names and addresses of the parties who have an interest in the property.

Within one year preceding the sale, the fair market value of the property to be sold must be appraised by the county assessor. The assessor’s determination is conclusive in favor of a bona fide purchaser.

The sale is held by public auction, and the property is sold to the highest bidder. Any person, even though he has a prior or existing lien on, or claim to or interest in the property, may purchase at the sale. If only a portion of the tax-defaulted property is sold, the remainder is subject to redemption.

Prospective bidders must give a deposit to the tax collector prior to the sale. The property must be sold for at least 25 percent of the fair market value as determined by the assessor. If the high bid exceeds $5,000, the tax collector may make the sale a cash or credit transaction; if the bidder elects to make the sale a credit transaction, the bidder must pay the larger of $5,000 or 10 percent of the bid, and the balance must be paid within 90 days as a condition to the delivery of the deed. The deposit of a bidder who defaults is forfeited and distributed to the county general fund. The tax collector may accept negotiable paper as payment at the sale, but the sale is not complete, and the deed will not be delivered, until the negotiable paper is paid.

Following the sale, notice of the excess proceeds is given to all persons who have an interest in the property. Within one year after the execution of the tax collector’s deed to the property “any party of interest in the property at the time of the sale” can file a claim with the county for distribution of any excess proceeds received at the tax sale. The property owner can assign his right to excess proceeds either before or after the tax sale, and if the assignment is clear and specific enough, and satisfies other requirements, the excess proceeds may be collected by the assignee. The excess is distributed to all interested parties in the order of their priority one year after the date of the sale. There are similar provisions applicable to sales to enforce bonds.

The tax deed is conclusive in favor of the grantee that all the procedures for assessment and sale have been taken properly, except in a case of actual fraud. The period of limitations challenging the validity of the treasurer’s deed (issued after the expiration of the one-year redemption period) is 6 months after the deed is issued. This period of limitations is binding even if the owner of the property at the time the deed is issued is unaware of the sale and even if the grounds for the challenge is the constitutional invalidity of the procedures.

If the district attorney determines that the property should not have been sold for taxes, the purchaser must execute a quitclaim deed to the assessee on payment of a refund of the amount paid at the sale.

After the expiration of 30 years following the date a tax becomes a lien, if the property has not been tax-defaulted by the tax collector, the lien of the taxes ceased to exist and is conclusively presumed to have been paid.

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—George Washington