The best escrow is a closed escrow.  Job well done…satisfied clients…all is well and it’s time to focus on the next one. Sometimes, though, like a zombie from a B-movie, a closed escrow will not die requiring some extra attention to put things right.

This particular example starts with a panicked phone call last month from Mrs. X, who just received a notice that she’d had a lien recorded against her by the Ventura County Tax Collector for the home she sold in April 2006. It was for less than $300 but there was no clue on the bill why she owed it and she wasn’t inclined to pay it. Especially since, from her view, escrow should have made sure that it had been taken care of. Right?

Mrs. X. is a charming lady with a thick Eastern European accent. Very nice and appreciative but watch out when she gets excited. She talks so fast; it’s hard to keep up with her. I sold her Ventura, California home for her in the spring of 2006 and she moved to Florida. She wasn’t mad at me—she just needed some help getting the matter resolved.

The mystery was quickly solved when I contacted Larry Matheny, Ventura County Tax Collector. Turns out that Mrs. X had an unpermitted addition on her house. Someone alerted the county and code enforcement came out to inspect it.  They required her to tear it down or take out the neccessary permits and bring it up to code. She decided to get it permitted and had just completed the process prior to calling me to list the house for sale. The Ventura County Tax Assessor eventually reassessed the property based on the “new construction” which is what caused the assessed value to go up and the Supplemental Tax Bill to be issued by the Tax Collector. The trouble was the process was so slow that it didn’t happen until months after escrow had closed.

Here’s the complete explanation from Larry Matheny:

My staff reports that they have talked with Mrs. X to explain that the “mystery tax bill” is an unsecured supplemental bill triggered by new construction on her property. So, the two most obvious questions (at least to me) are, “why did it take so long to generate a bill?” and “why didn’t she get a bill before the lien recorded?”

As to the first one, in cases like this we are entirely dependent upon the Assessor’s office first doing the important job of assessing the added value of new construction. I don’t presently have any information as to how long it took from the time when they first became aware of the new construction and when they entered the new value on the roll. We can’t print a bill until at least 60 days have expired from the point when the Notice of Assessment is mailed to the property owner.

As to the second question, if a property owner closes escrow on the sale of property that is being examined by the Assessor for a supplemental assessment, we almost always end up with an undeliverable tax bill. That deed of conveyance that transferred Mrs. X’s interest to the buyer did not include a forwarding address for the seller. It is, unfortunately, not a rare situation to have a taxpayer sell the property before either the Supplemental Bill or the Notice of Supplemental Assessment can be delivered. In such cases, the existence of the tax obligation is not learned until the recorded lien pops up…often at an inopportune moment near the close of an escrow.

I’ll offer the take-away lesson that a Realtor who is representing a seller who has held title for less than a year would be doing the client a tremendous service by getting in touch with the Assessor (805-654-2181) to see if a supplemental assessment is being worked. In our current market, that resulting supplemental “bill” may well be a refund that is pending, but can’t be delivered for the same “can’t find the former owner” reason that applied when we are trying to deliver a bill that calls for a payment.

For whatever it is worth, our office, in cooperation with the Assessor and the Auditor-Controller, has started a project to replace our current 20-year old plus land tax system. The new system will incorporate many streamlined features that should have a positive impact on the processing time for supplemental. That’s the good news. The bad news is that the task is sufficiently complex as to likely require in excess of $20 million to build and probably will not be ready for 3 to 5 more years.

Sorry that this became so long-winded. I wanted to give you a full perspective that you can, hopefully, share with others.

Now that Mrs. X. understood the reason for the bill, she paid it. Perhaps this transaction can now rest in peace.

In a previous post titled “Private Transfer Fees—A Hidden Tax”, I described Private Transfer Taxes or Private Transfer Fees, as they are now called. The California Association of REALTORS (C.A.R.) coined these terms, but don’t expect that wording when looking to see if you have it. Developers are very creative in disguising the name with terms like Endowment Fee, Trust Fee, Open Space Conservatory Fee, etc. The key is that it’s going to be a fee that shows up in the title search and not on your property tax bill. The following is an update to that post:

I have found 2 developments in Ventura County that have imposed this Private Transfer Fee. One in Camarillo at Addison Lane in Village at the Park. The other in Ventura at the Melody Condominiums—where Telephone Road and Saratoga Avenue intersect. Both developments were built by Lennar.

If you are a homeowner in either of these developments, you have an added, legally-required disclosure to make to any interested buyer regarding the existence of a Private Transfer Fee. You may not recall or even know that you have this fee attached to your property, but I assure you, a simple title search on your property will reveal not only the existence of the fee, but the method for calculating the fee which must be paid prior to transfering your property.

In the case of these Lennar built homes, the Private Transfer Fee is specifically named an “Endowment Fee” in the title record with the profits from such fees going to the Lennar Charitable Housing Foundation. And the kicker…This fee will be applied to all transfers of these properties—in perpetuity!

If you are a propective buyer for one of these homes, you’d better beware. You will inherit the obligation to pay the “Endowment Fee” should you decide to move forward and make the purchase. I hope you really love that home ‘cause you may have a harder time selling it in today’s market!

Lennar’s website describes the Lennar Charitable Housing Foundation and specifically states, “Lennar is pleased to have been a founder in this unique program of giving back to our Community, and looks forward to its expansion in other areas of Lennar Community development.” No kidding—their seed has definitely been spread around. Lennar has developments throughout Southern California—some as close to Ventura County as Valencia and Santa Clarita. And, its a safe bet that Lennar has at least some of these developments contributing to their foundation.