7/19/2001

LEGAL AID FOUNDATION OF LOS ANGELES

BEHIND IN YOUR PROPERTY TAXES?

Produced with the support and cooperation of the UCLA Advanced Policy Institute

7/19/2001

LEGAL AID FOUNDATION OF LOS ANGELES

BEHIND IN YOUR PROPERTY TAXES? What happens if you don’t pay the taxes? ……………………………… 1 How can you catch up on the delinquent taxes? ……………………….. 2 Plan 1 – Partial Payments ……………………………………….. 2 Plan 2 – Installment Plan of Redemption (The 5-Year Pay Plan) . …………………………………. 3 Full Payment ……………………………………………………… 5 What happens if the tax collector sells your property? ……………….. 6 How can you get your property back after it is sold? …………………. 7 a. Do you qualify for tax assistance from the State? …………..……. 8 b. Property Tax Postponement Program …………..………………… 8 Homeowner Assistance Program ………………………………………… 10 Can the bank foreclose because of delinquent taxes? ………………….. 12 How to Obtain A Reassessment of Your Property Due to a Decline in its Value? (Proposition 8) …………………………………… 13 How to Obtain A Reassessment Exclusion for Real Property Transfers Between a Parent and Child? (Proposition 58) ………………………. 14 Reassessment Exclusion for Real Property Transfers From Grandparents and Grandchildren (Proposition 193)…………………… 17 Important Phone Numbers ……………………………………………… 20

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LEGAL AID FOUNDATION OF LOS ANGELES

BEHIND IN YOUR PROPERTY TAXES? What happens if you don’t pay the taxes?

If you do not pay the first installment of your annual tax bill at the Tax

Collector’s office by 5:00 p.m. on December 10, or your payment is not postmarked

by that time and date, then that installment becomes delinquent and a 10%

delinquent penalty is incurred.

If you fail to pay the second installment at the Tax Collector’s office by 5:00

p.m. on April 10, or your payment is not postmarked by that time and date, it

becomes delinquent, and a 10% penalty on the unpaid taxes as well as an

administrative charge of $10 are added.

Likewise, if you fail to pay any supplemental tax bill installment by the

applicable delinquency date, the same penalties and charges accrue as for

delinquent annual taxes.

If there are any ANY unpaid taxes as of 5:00 p.m. on June 30, then the property

becomes tax defaulted. Once the property has become tax defaulted, a redemption fee of

$15.00 and additional penalties begin to accrue at the rate of 1 ½% per month of the unpaid

taxes. This monthly penalty is added at 5:00 p.m. on the last day of each month (or the

following business day if the last day of the month falls on a weekend or a holiday).

Your taxes can remain unpaid for a maximum of five (5) years following their tax

default, at which time your property becomes subject to the power of sale. This means

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that your property will be sold at a public auction or acquired by a public agency if you

do not pay the taxes before the date on which the property is offered for sale or

acquisition.

How can you catch up on the delinquent taxes?

If you are unable to pay the full redemption amount of your unpaid taxes, and your taxes

are in default you have the choice of making partial payments or you may choose to open an

installment plan of redemption.

To obtain an estimate of the amount required to redeem your property, you should

contact the Los Angeles County Tax Collector at (888) 807-2111. (This is a toll free

number), and make a request for an estimate of your taxes. This line operates 24 hours a

day, 7 days a week.

When you make your call you will need to provide the following:

a. Assessor’s Identification Number (consisting of the map book, page and

parcel number), which you can find on a previous tax bill, OR

b. The address, OR

c. The legal description of the property.

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Plan 1

Partial Payments

If you are unable to pay your delinquent taxes in full, the Tax Collector’s

Office accepts partial payments. Partial payments are applied according to the

following priority:

(a) Redemption fee,

(b) Costs;

(c) Secured penalties,

(e) Redemption penalties, and

(f) Tax amounts starting with the oldest year of default.

The 1/12% redemption penalty is calculated on the total unpaid tax balance.

If a “Subject to Power To Sell” legend appears on your statement, which indicates

that the taxes are more than five years in arrears, additional costs will also be

included and itemized.

Partial payments will not affect the “Subject to Power To Sell” tax status. If

the property is not fully redeemed, it will be eligible for sale at a public auction.

Plan 2

Installment Plan of Redemption (The 5-Year Pay Plan)

This Plan allows you to make payments on your delinquent taxes in five (5)

installments over a five–year period beginning the date you open the installment

account.

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IT IS RECOMMENDED THAT YOU CONTACT YOUR LENDER/MORTGAGE

COMPANY BEFORE YOU APPLY FOR THE INSTALLMENT PLAN OF

REDEMPTION TO MAKE SURE THAT THEY ALLOW THE 5-YEAR PAYMENT

PLAN TO PAY TAX DEFAULTED TAXES

To open an installment plan you must:

1. Pay a $20 application fee payable at the time the plan is opened.

2. Make an initial payment of at least 20% of the redemption amount

including penalty and interest charges of 1.5% per month).

3. Pay your current year’s taxes. All current year taxes must be paid on

or before April 10th. If during the course of an installment plan the

current taxes are not paid by April 10th, the plan is in default.

Once a year, you will receive an Installment Plan of Redemption statement

indicating the minimum amount required for that installment payment. Payoff

payments are accepted anytime before the 5th and final payment is due.

If the first account defaults because of your failure to make at least one

installment payment between July 1 and April 10, or because of your failure to pay

your current year’s taxes in full by April 10, you may open another account.

However, the second account may not be opened until July1 of the following fiscal

year.

If you default a second time, you may open a third installment account.

Previous payments will be treated as partial payments and will not be credited to

the new plan. Penalties will be computed on the unpaid balance each time a plan is

opened and a $20 application fee will be charged with each plan opening.

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If you default a third time, no further installment accounts will be permitted,

and your property will become subject to the power of sale the following June 30.

You may NEVER reopen a new Installment Plan of Redemption account in the

same calendar year that the property becomes subject to the power of sale. This occurs

when the property has been delinquent for more than five years.

In that case, your property will be sold at a public auction or acquired by a

public agency if you do not pay the full redemption amount before the date on

which the property is offered for sale or acquisition.

Example: If you have delinquent taxes from the 1994-95 tax year, as

of July 1, 2000, you CANNOT participate in the installment plan.

You must pay the full amount of outstanding taxes to keep the

property from being sold at the Public Auction.

Each time you open an account, you have five years to pay the full redemption

amount. However, it is your advantage not to default on any installment account, since there

is an additional penalty of 1 ½% on the unpaid balance.

Contact or write the Treasurer and Tax Collector’s Office to request an

application for the Installment Plan of Redemption:

Contact: Treasurer and Tax Collector 225 North Hill Street First Floor Los Angeles, CA 90012 (888) 807-2111 (Toll Free)

This line operates 24 hours a day, 7 days a week. (213) 974-2196 (Hearing Impaired Teleprinter)

Correspondence: Treasurer and Tax Collector P.O. Box 512102

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Los Angeles, CA 90051-2102

Full Payment

If you do not wish to make partial payments or enroll in the Installment

Plan, you may pay the full redemption amount (all unpaid taxes for all delinquent

years plus penalties and charges).

The amount needed to redeem tax-defaulted property in full is the sum of the

following:

1. The total amount of unpaid taxes for all delinquent years.

2. A 10% penalty on every unpaid installment.

3. A $10 administrative charge for each delinquent year.

4. Monthly penalties of 1 1/2% of the unpaid taxes accrued to

date.

5. A redemption fee of $15.

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What happens if the tax collector sells your property?

Upon the completion of the sale, the Treasurer and Tax Collector files reports

with the County Recorder, County Assessor and the State Controller to address the

transfer of title and distribution of proceeds from the sale.

For one year following the action sale the Treasurer and Tax Collector must

respond to issues concerning challenges to the validity of the sale and excess

proceeds claims.

If there is an excess of the proceeds from the sale, the Treasurer and Tax

Collector will send a claim form to the prior owner and all lien holders on the

property. The deadline to file a claim for the excess proceeds is one year after the

recordation date of the tax deed to the new owner.

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• How can you get your property back after it is sold?

All sales are final once the tax defaulted property has been sold at a public

auction by the L.A. County Treasurer and Tax Collector. The right to redeem Tax

Defaulted Property Subject to Power to Sell ceases at 5:00 p.m. on the last business

day prior to the first day of the auction.

Occasionally, however, a piece of property is sold at an auction after redemption

has been made or the property is sold in error. If that is the case, a refund of the

purchase price will be made to the purchaser and the Treasurer and Tax Collector

will inform the purchaser that title to the property will be maintained by the present

owner of record.

For information contact:

Los Angeles County Treasurer And Tax Collector, (213) 974-2045.

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• Do you qualify for tax assistance from the State? Property Tax Postponement Program

The Senior Citizens and Disabled Property Tax Program, administered by

the Division of Collections, State Controllers Office, allows qualified homeowners to

postpone payment of all or a portion of the property tax due on their residence.

To qualify you and all other recorded owners (**except your spouse and

direct-line relatives) must meet each of the following requirements:

1. Be a California resident;

2. Be 62 years of age or older as of December 31, 2000; OR

3. Blind or disabled at the time of the application. If you are disabled,

your disability must be expected to last for a continuous period of at

least twelve (12) months.

4. Your total household income for the calendar year 1999 must not

exceed $24,000.00. However, if you applied and qualified for a tax

postponement for the 1983-84 tax year, your income must not exceed

$34,000.

5. The owners must have a combined 20% equity interest in the home at

the time of filing. Your application cannot be approved if the liens,

deeds of trust, mortgages, or other encumbrances against the home

amount to more than 80% of its fair market value as determined by

the State Controller.

*Direct –line relatives are defined as (a) parents, children or grandchildren of the claimant and/or the claimant’s spouse

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6. As of December 31, 1999, you and all other recorded owners (except

your spouse and direct-line relatives) must have owned and occupied

your principal place of residence, the property for which property

taxes are to be postponed.

The amount of taxes postponed generally does not need to be repaid to the

State until:

(1) You move from the property;

(2) You sell or convey title to your home;

(3) You die and you do not have a spouse or other qualified

individual who continues to reside in the home; or

(4) Future property taxes or other senior liens are allowed to

become delinquent.

You may make payments on your postponed property tax account in any

amount at any time. All payments received are applied first toward accumulated

interest and then toward the outstanding principal balance (postponed tax amount).

You must apply for a Property Tax Postponement each year that you desire

to have the property taxes postponed. Claim forms and information regarding

Property Tax Postponements may be obtained by calling the State Controllers

Office at (800) 952-5661 or (916) 327-5587.

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Homeowner Assistance Program

Once a year the State of California reimburses a portion of the property

taxes paid on homes to qualified homeowners. If you qualify for the Property Tax

Postponement Program, you may also qualify for the Homeowner Assistance

Program, which is a separate and distinct program administered by the Franchise

Tax Board. You may participate in both programs if you qualify. If your

Homeowners Assistance application is granted and the State Controller’s Office

grants your claim for property tax postponement for the fiscal year, the amount of

the homeowners assistance will be sent to the State Controller’s Office to reduce the

balance due on the postponed tax payment.

Eligibility is determined by the State Controller’s Office. The requirements

are:

1. You must have owned and lived in the home in California on the

December 31st preceding the year of filing -- A home may include a

condominium, “own your own” apartment or mobile home.

2. Your household income must not exceed $33,993.00;

3. Have a gross household income of $60,240 or less in 1998. Gross

household income is the total household income plus all non-cash

business expenses such as depreciation, amortization and depletion;

and

4. You are a United States Citizen, a designated alien, or qualified alien

when you file your claim.

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Homeowners Assistance Program will not place a lien on your home.

However if you postpone your property taxes through the State Controller’s

Property Tax Postponement Program, a lien will be placed on your property.

Note: Only one homeowner from one household is entitled to

assistance each year. When two or more individuals of a household

meet the qualifications for filing a claim as a homeowner, they must

decide which one of them will file the claim.

You may apply for Homeowner Assistance even though you are not required

to file a state income tax return.

To apply for the Homeowners Assistance Program you should contact the

Franchise Tax Board at (800) 852-5711.

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• Can the bank foreclose because of your delinquent taxes?

Yes. The bank has the right to foreclose on your property if your property taxes become

delinquent. The deed of trust on your property requires that all taxes be kept current. Non-

payment of your property taxes will result in your property being placed in default by your

lender.

Under certain circumstances, the bank has the right to foreclose on your property if your

property taxes become delinquent and you have not made arrangements with the Tax

Collector’s Office to cure the delinquency.

The deed of trust on your property that the bank holds requires that all property taxes be

kept current. Non-payment of your property taxes can result in the bank paying the property

taxes and placing your property in default. If you do not make arrangements with your bank

to reimburse them for the advancement, they can start foreclosure proceedings against your

property that can lead to your property being sold.

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• How To Obtain A Reassessment Of Your Property Due To a Decline in its Value?

(Proposition 8)

Any property located in the County of Los Angeles that can be proven to be worth

less on the open market on January 1 of the current year, than its current assessment, will

qualify for a Proposition 8 “decline in value” reduction. Property owners must apply for the

reduction and provide proof of the decline in value, such as sales of comparable properties

in their neighborhood or deferred maintenance. If the Assessor agrees that the property has

declined in value, the assessed value will be reduced to the current market value as

determined by the Assessor.

The Assessor reviews properties with a Proposition 8 assessment each year on

January 1, to verify whether the conditions that resulted in the decline in value still exist.

Based upon the market condition the value may change annually, but will not exceed the

original base value.

Applications for a decline in value reassessment must be filed with the Assessor’s

office between January 1 and March 15 of the current year to be effective for your next

annual tax bill.

Applications are available at:

Assessor’s Office

Kenneth Hahn Hall of Administration 500 West Temple Street

Room 225 Los Angeles, CA 90012,

(213) 974-3211.

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• How to Obtain A Reassessment Exclusion For Real Property Transfers Between A Parent and Child (Proposition 58)

Transfers of real property between parents and children are excluded from

reassessment. Proposition 58 provides property tax relief by preventing reassessment of real

property when the property transfers between parents and *children.

If the parent or child who acquires the property files a claim that is approved by the

Assessor, the reassessment will be excluded. If the property has already been reassessed,

the reassessment will be reversed, a corrected tax bill will be issued and, if necessary, a

refund will be sent.

Proposition 58 applies to transfers occurring on or after November 6, 1986. The

claim must be filed within three (3) years of the date of transfer, or date of death, but before

transfer to a third party. The claim will also be considered timely if it is filed within six (6)

months after the Notice of Assessed Value Change.

The exclusion may only be applied to future tax years. It cannot be applied

retroactively back to the date of the transfer.

The following requirements apply:

1. Transfers of real property between parents and children, and between

children and parents are excluded from reassessment.

* (a) Any child born of the parent(s). (b) Any stepchild of the parent(s) and the spouse of that stepchild while the relationship of stepparent and stepchild exists. The relationship exists until the marriage on which the relationship is based is terminated by divorce, by death or until the remarriage of the surviving stepparent. (c) Any son-in-law or daughter-in-law of the parent(s) while the relationship exists. The relationship exists until the marriage on which the relationship is based is terminated by divorce or death or until the remarriage of the surviving son-in-law or daughter-in-law. (d) Any statutorily adopted child who was adopted before the age of 18.

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2. The seller’s or decedent’s principal residence is totally excluded from

reassessment. In addition, $1,000,000 of the seller’s or decedent’s other real

property is also excluded.

3. There is no value limit for excluding the seller’s or decedent’s principal

residence from reassessment. A Homeowners’ Exemption or Disabled

Veterans’ Exemption must have been granted to the seller or decedent. This

residence need not be the principal residence of the person who acquires the

property.

4. Real property other than the principal residence of the seller or decedent with

an assessed value up to $1,000,000 is excluded from reassessment. The

sales price or actual “current market value” does not affect the $1,000,000

limit.

5. The total value of property (or properties) which a parent may transfer to all

children without reassessment is $1,000,000 of assessed value, for property

other than the principal residence.

This limit is cumulative over time. After property (or properties) with

$1,000,000 of assessed value is transferred without reassessment, all future

reassessments (except the transfer of the principal residence if it has not

already been transferred).

The $1,000,000 limit applies only to transfers of properties within the

State of California.

6. The $1,000,000 exclusion is a limit for each parent separately. Community

property of married parents would have a $2,000,000 limit.

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7. Transfers by sale, gift, devise or inheritance qualify for the exclusion.

8. Transfers between parents and children as individuals, between joint tenants,

from trusts to individuals or from individuals to trusts may qualify for the

exclusion.

Transfers of ownership interest in legal entities DO NOT qualify for

exclusion. Transfers through trusts, however, may qualify.

9. The person who acquires the property must file their claim within three years

of the date of transfer, and before transfer to a third party; or within six

months after the date of mailing of a Notice of Assessed Value Change,

issued as a result of the transfer of property for which the claim is filed,

whichever is later.

To file for a reassessment, contact:

Assessor’s Office Kenneth Hahn Hall of Administration

500 West Temple Street Room 225

Los Angeles, CA 90012, (213) 893-1239

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• Reassessment Exclusion For Real Property Transfers From Grandparents and

Grandchildren (Proposition 193)

Transfers of real property from grandparents to grandchildren are excluded from

reassessment. Proposition 193 provides property tax relief by preventing reassessment of

real property when the property transfers from grandparents to ∗grandchildren.

If the grandchild who acquires the property files a claim that is approved by the

Assessor, the reassessment will be excluded. If the property was already reassessed, the

reassessment will be reversed and a corrected tax bill will be issued and, if necessary, a

refund will be sent.

Proposition 193 applies to transfers occurring on or after March 27, 1996. The claim

must be filed within three (3) years of the date of transfer, or date of death, but before

transfer to a third party. The claim will also be considered timely if it is filed within six (6)

months after the Notice of Assessed Value Change.

The exclusion may only be applied to future tax years. It cannot be applied

retroactively back to the date of the transfer.

The following requirements apply:

∗ (a) Any child born of the parent(s). (b) Any step-grandchild of the parent(s) and the spouse of that step-grandchild while the relationship of stepparent and step-grandchild exists. The relationship exists until the marriage on which the relationship is based is terminated by divorce, by death or until the remarriage of the surviving stepparent. (c) Any grandchildren-in-law of the parent(s) while the relationship exists. The relationship exists until the marriage on which the relationship is based is terminated by divorce or death or until the remarriage of the surviving son-in-law or daughter-in-law. (d) The parents of the grandchild(ren) who would qualify for a Proposition 58 exclusion from the grandparents must be deceased.

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1. Transfers of real property from grandparents to grandchildren are excluded

from reassessment. Transfers from grandchildren to grandparents are NOT

excluded from reassessment.

2. The seller’s or decedent’s principal residence is totally excluded from

reassessment. In addition, $1,000,000 of the seller’s or decedent’s other real

property is also excluded. There is a qualification to this rule under Prop.

193 -- If the grandchild had received property in the past that was

excludable under Section 63.1 of the Revenue & Taxation Code as a

principal residence, any principal residence that the grandchild receives

from grandparent is considered “other real property” that is subject to

the $1,000,000 limitation.

3. There is no value limit for excluding the seller’s or decedent’s principal

residence from reassessment. A Homeowners’ Exemption or Disabled

Veterans’ Exemption must have been granted to the seller or decedent. This

residence does not have to be the principal residence of the person who

acquires the property.

4. Real property other than the principal residence of the seller or decedent with

an assessed value up to $1,000,000 is excluded from reassessment. The

sales price or actual “current market value” does not affect the $1,000,000

limit. The $1,000,000 exclusion that is available to grandchildren for

property other than a principal residence received from their

grandparents is the same $1,000,000 exclusion that they have remaining

available from their parents under Prop 58.

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5. The total value of property (or properties) which a parent may transfer to all

children without reassessment is $1,000,000 of assessed value, for property

other than the principal residence.

This limit is cumulative over time. After property (or properties) with

$1,000,000 of assessed value is transferred without reassessment, all future

reassessments (except the transfer of the principal residence if it has not

already been transferred).

The $1,000,000 limit applies only to transfers of properties within the

State of California.

6. A grandchild can have excluded only $1,000,000 of property transferred

from his or her father AND his parents (paternal grandparents) and

$1,000,000 of property transferred from his or her mother AND her parents

(maternal grandparents).

7. Transfers by sale, gift, devise or inheritance qualify for the exclusion.

8. Transfers from grandparents to grandchildren as individuals, between joint

tenants, from trusts to individuals, or from individuals to trusts may qualify

for the exclusion.

Transfers of ownership interest in legal entities DO NOT qualify for

exclusion. Transfers through trusts, however, may qualify.

9. The person who acquires the property must file their claim within three years

from the date of transfer, or within six months after the date of mailing of a

Notice of Assessed Value Change, issued as a result of the transfer of

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property for which the claim is filed, whichever is later. The property,

however, must not have transferred to a third party.

To file for a reassessment, contact:

Assessor’s Office Kenneth Hahn Hall of Administration

500 West Temple Street Room 225

Los Angeles, CA 90012, (213) 893-1239

IMPORTANT PHONE NUMBERS

To Redeem Tax-Defaulted Property Contact:

Treasurer and Tax Collector Kenneth Hahn Hall of Administration

225 North Hill Street, First Floor Los Angeles, CA 90012

(888) 807-2111

Estimates of the Amount Required to Redeem Tax Defaulted Property:

Office of the Assessor Kenneth Hahn Hall of Administration

500 West Temple Street Room 225

Los Angeles, CA 90012 (213) 974-3211

Deed Recordation

Registrar-Recorder/County Clerk

12400 Imperial Highway Norwalk, CA 89650

(562) 462-2125 (800) 201-8999

Property Tax Postponement Program

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State Controllers Office P.O. Box 94250

Sacramento, CA 942250-2005 (800) 952-5661 or

Homeowner Assistance Program

Franchise Tax Board

P.O. Box 942840 Sacramento, CA 94240-0070

(800) 525-5711

Public Auction Sale of Tax Delinquent Real Property

Treasurer and Tax Collector Kenneth Hahn Hall of Administration

225 North Hill Street, First Floor Los Angeles, CA 90012

(888) 807-2111