Many children and more than a few adults are counting the days and hours until Santa arrives next week. But taxpayers who’ve yet to pay their 2014 property tax bills should be counting the days and hours until January 6, 2015, the date on which those taxes become delinquent.
In a previous post I described the basic issues concerning interest and enforced collections once January 6 arrives. In today’s post, I focus on two more January 6 issues: record ownership and delinquency warning notices.
Determining record ownership as of January 6 is crucial because it’s that owner (and subsequent record owners) who can be held personally responsible for taxes on real property. G.S. 105-365.1(b)(1). A prior owner who was not the record owner as of January 6 may not be held personally responsible for taxes on the real property in question. What’s more, the tax office must advertise delinquent tax liens in the name of the January 6 record owners and not in the name of prior owners. G.S. 105-369(c)(1a).
This is a different rule from that governing the collection of delinquent taxes on personal property, which is permitted against only the January 1 listing owner. See this blog post more details.
The record owner is the party named in a document affecting ownership that has been recorded or filed with the county or state. Most often, of course, record ownership is determined by the recording of a deed with the county register of deeds. But record ownership could be also be determined by a court order or filing, as with divorce or estate probate proceedings. See pages 99-100 in my property tax collection book for more details.
Because record ownership as of January 6 is so crucial, local governments should make it their practice to update real property ownership listings as of January 6 each year before they take any action on delinquent real property taxes.
Here’s how the record-owner rule might work in practice.
Assume Billy Blue Devil owns Parcel A in Carolina County. He sells it to Tina Tar Heel on January 3, 2015, who immediately records the deed with the Carolina County Register of Deeds.
If the 2014-2015 taxes become delinquent, only Tina may be held personally responsible for those taxes. Tina’s wages and bank accounts and cars are at risk, not Billy’s.
This is true regardless of any contractual agreement between Billy and Tina about the payment of property taxes. The fact that Billy may have promised to pay some or all of the 2014 taxes on Parcel A does not authorize Carolina County to go after Billy for those taxes. Tina may be able to enforce Billy’s promise in court, but that doesn’t prevent the county from holding Tina personally responsible for the taxes that were the subject of that agreement.
Let’s change the facts a bit. Assume that Billy sells Parcel A to Tina on January 3, 2015, but Tina does not record the deed until January 10. Who’s the record owner as of January 6? Billy is, because there was no change in record ownership as of January 6; a signed deed does not affect record ownership until it is recorded. If the 2014 taxes remain unpaid, the county could target the personal property of either Billy (as the January 6 record owner) or Tina (as a subsequent owner). Billy might have a contractual claim against Tina based on her failure to record the deed in a timely fashion, but that would not affect the county’s collection remedies.
What if Tina records the deed on January 6? Billy and Tina would still both be personally responsible for the taxes on Parcel A, because Billy would be the record owner as of 12:01 a.m. on January 6 and Tina would be a subsequent owner.
The most common situation in which record ownership problems arise is with heir property. Assume Uncle Milton dies in October 2014 while he was the record owner of Parcel B. Uncle Milton was married and divorced three times and has eight children living across the state from his various marriages.
Who should be considered record owner of Parcel B as of January 6, 2015? Unless and until Uncle Milton’s estate is probated, record ownership should be listed in the name of “Estate of Uncle Milton” or “Heirs of Uncle Milton.” Either way, none of Uncle Milton’s kids or any of his other potential heirs could be held personally responsible for the 2014 taxes on Parcel B because none of them is a record owner. The only property that could be targeted by the county for collection of the 2014 taxes on Parcel B is property owned by Uncle Milton’s estate: bank accounts or cars or anything else that has not been titled in other names.
Remember that regardless of record ownership, delinquent taxes on real property may always be collected through foreclosure on the real property itself. In each of the examples above, the county could initiate foreclosure against the real property in question after the taxes become delinquent on January 6.
Many local governments across North Carolina send delinquency notices to taxpayers on or shortly after January 6 warning them that their taxes are delinquent and subject to interest and enforced collections.
I think this is a smart practice, for a number of reasons. Most taxpayers haven’t received any reminders of their tax obligations since the original tax bills were mailed six months ago. Warning letters are customer-friendly and are likely to produce payment from taxpayers who simply forgot about their taxes or who were just dilly-dallying about writing the required checks. And many local governments kill two birds with one stone by combining delinquency notices with mandatory notices in advance of advertising taxpayers with delinquent real property taxes.
But be aware that the Machinery Act does not require delinquency notices; a taxpayer cannot legitimately defend against an enforced collection action by arguing that the tax office first should have sent a warning and given the taxpayer one last chance to pay the delinquent tax before garnishing wages or attaching a bank account or levying on a car.
The 2015 Property Tax Calendar
You can find the basic details and statutory citations for January 6 and every other important property tax date on the just-released 2015 Property Tax Calendar.