Suppose that someone inherited a plot of undeveloped land in a small town in California. The town has a few houses and businesses, but is mostly comprised of undeveloped lots. Even so, suppose this town levies property taxes to suppose the local services (fire, waste disposal, etc.) which are in excess of the market value of the property (a few hundred dollars per year). If there are no conventional buyers of such a plot, are there any legal ramifications to selling said property to, say, an indigent buyer who has questionable means and perhaps low propensity to pay the taxes, but who could be incentivized to purchase the property for only a small loss to the seller?
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2 Answers
The question seems to assume that the purpose of the sale is to avoid property tax liability.
First, property tax liability on a parcel of property with marginal value is generally only a tiny percentage of the fair market value of the property, and the usual remedy if the property is overvalued is to contest the valuation of the property when it is made. Property taxes on property with a fair market value of a few hundred dollars would almost never be more than $1 per year.
Second, the usual remedy for non-payment of property tax, if it continues long enough, is for the property to be sold for tax liens in foreclosure sale. It would be extraordinarily exceptional for a lawsuit against the owner to be pursued to collect (lawsuits against owners are used in California to collect property taxes on tangible personal property that is subject to a property tax).
So, the implicit motives behind the question are misguided.
But, a property owner is free to sell real estate to an unrelated third-party at any price the seller wants, even if the buyer can't afford to pay the property taxes on the property. The buyer takes subject to property tax liens for unpaid property taxes on the property.
answered Jun 23, 2021 at 22:36
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Well, the city assesses the property to be worth several thousand dollars, but the market is extremely illiquid, and land sale sites show plots in the area that have been on the market for years at a lower price. Given that the owner lives in a different state, the cost of travelling to the site in person to file necessary paperwork would easily be as much as the property is worth. In a foreclosure sale, who would end up with the property? Is there a way to get that party to accept the property immediately, without the rest of the process? Commented Jun 24, 2021 at 0:19
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1The bidder at the foreclosure sale who offers the highest price after the sale is published gets the property. The government gets the tax owed. Any excess is paid to the former owner of the property. And, several thousand dollars of value still translates to tens of dollars a year in taxes, at most. What's the rush? Do nothing long enough and it goes away. Commented Jun 24, 2021 at 0:21
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What if nobody submits a bid? The property is assessed at $2000, even though some potential buyers offered closer to $400, but bailed. The annual taxes are > $300. The owner is retired on a fixed income, and has much more important ways to spend $300/yr. Given the tax situation, I think the market value of this property is truly negative, since it amounts to the right of the county to assess exorbitant taxes for services not actually rendered. Commented Jun 24, 2021 at 0:28
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1If nobody submits a bid, the property goes to the county. Also, color me deeply skeptical that any jurisdiction in California has a mill level that is 15% of FMV as determined by the assessor. Something about this story stinks. Commented Jun 24, 2021 at 0:29
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Is there generally a process to forfeit property back to the county without going through the tax non-payment step? I don't see why any county would allow such a thing, given that it's free revenue to them. Commented Jun 24, 2021 at 0:31
Your job as a seller is not to vet or guarantee the ability to pay debt for a particular buyer. There are no legal problems here unless your intent is to defraud.
