General real estate taxes are taxes levied against property as provided in state constitutions or under the general authority of state statutes.
Carefully examine these regulatory tax provisions to fully understand the tax structure of jurisdiction and to determine when any general or special tax becomes a lien on real property.
Taxes, general or special, are levied by states, counties, cities, towns, villages, school districts, and other entities.
Tax records are usually maintained by the collections entities authorized by law in each jurisdiction.
Special Assessments are taxes imposed on real property by the taxing to pay for improvements which directly benefit the property like streets, sewer lines, sidewalks, and drainage installations. Statutes usually provide that the special assessments are liens on the properties to be benefited. These liens may attach at the commencement of construction of the improvement or at an earlier or later time, as designated by the statute.
Since there are many kinds of assessments in the various jurisdictions, it is important to become familiar with the assessments encountered locally, to know which of these is considered an assessment appearing on a public record and thus required to be shown as an exception in the policy and to know when such assessment becomes a lien.
Some assessments are payable in installments. In such cases, it will be necessary to show the assessment and indicate which of the installments has been paid and which of the installments remains due and unpaid. Future installments, although not yet due, can become a lien and must therefore be shown.
In this connection, it is especially important to remember that:
- Although the assessment may be payable in installments, the statutes usually
provide that a lien will be for the full amount assessed against the property,
which includes future installments not yet due and payable.
- A property may be considered as benefited and therefore, subject to assessment
by improvements in streets other than that upon which the property abuts.
- Assessments can be the source of substantial losses so do not reply upon
verbal reports of tax or assessments offices as to the existence or non-existence
of special assessments.
- Just because an assessment is not on the record is not conclusive proof that an assessment is not a lien at the date of the policy.
Tax Rolls Description
In many localities, tax rolls contain indefinite, imprecise, and even erroneous or defective legal descriptions, because taxes represent one of the major areas of losses for title insurance underwriters, it is necessary to exercise the utmost care when examining how the tax rolls reflect or describe the property to be insured.
This is an area where nothing should be assumed or presupposed.
Tax Rolls Examination
Follow these guidelines when examining a tax roll legal description of the property to be insured. The affirmative answer to any of the following questions may make it necessary to make an additional title requirement or to list an exception in the title commitment:
- Is the tax roll description so vague and indefinite that the property cannot be properly and certainly identified?
- Has a portion of the property not been assessed?
- Has a portion of the property been assessed in conjunction with an adjoining property?
- If a portion of the property is accreted land, do tax rolls omit the description of that portion?
- If a portion of the property is part of a vacated street, road or abandoned railroad right of way, do tax rolls omit describing that portion?
- Is the property within a benefit district for which no assessments have been levied?
- Is the property exempted from taxation but the tax rolls do not show it as "exempt"?
- Does local law require the taxation of a leasehold estate?
- Is the property railroad property?
- Are the taxes by the property being paid by anyone other than the record owner?
Tax Exempt Status
Before relying on a property's tax exempts status, determine that the tax books show the property as tax exempt. Do not ignore prior underpaid taxes or rely on the present tax exempt status of the property.
Similarly, consider the possible loss or change of the tax exempt status of the property as a direct result of the transaction to be insured. If pertinent, it may be necessary to take exception as to the current year's taxes.
ALTA Endorsement--Form 1 (Street Assessments)
ALTA Endorsement--Form 1 will insure a lender that his lien has priority over any assessment liens that have been or will be imposed on the land for street improvements under construction or completed at the date of the policy. This endorsement may be furnished only upon request and in those situations where records do not disclose the existence of special assessments against the land.
Do not issue the endorsement without thorough research and understanding of state law in regard to the existence of special assessment.