LEGAL AID FOUNDATION OF LOS ANGELES BEHIND IN YOUR PROPERTY TAXES?

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

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LEGAL AID FOUNDATION OF LOS ANGELES BEHIND IN YOUR PROPERTY TAXES? What happens if you don’t pay the taxes? ……………………………… How can you catch up on the delinquent taxes? ……………………….. Plan 1 – Partial Payments ……………………………………….. Plan 2 – Installment Plan of Redemption (The 5-Year Pay Plan) . …………………………………. Full Payment ……………………………………………………… What happens if the tax collector sells your property? ……………….. How can you get your property back after it is sold? …………………. a. Do you qualify for tax assistance from the State? …………..……. b. Property Tax Postponement Program …………..………………… Homeowner Assistance Program ………………………………………… Can the bank foreclose because of delinquent taxes? ………………….. How to Obtain A Reassessment of Your Property Due to a Decline in its Value? (Proposition 8) …………………………………… How to Obtain A Reassessment Exclusion for Real Property Transfers Between a Parent and Child? (Proposition 58) ………………………. Reassessment Exclusion for Real Property Transfers From Grandparents and Grandchildren (Proposition 193)…………………… Important Phone Numbers ……………………………………………… 1 2 2 3 5 6 7 8 8 10 12 13 14 17 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. c. The address, OR 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. 2. Pay a $20 application fee payable at the time the plan is opened. 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. 2. 3. 4. The total amount of unpaid taxes for all delinquent years. A 10% penalty on every unpaid installment. A $10 administrative charge for each delinquent year. 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. 2. 3. Be a California resident; Be 62 years of age or older as of December 31, 2000; OR 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) (2) (3) You move from the property; You sell or convey title to your home; 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. 3. Your household income must not exceed $33,993.00; 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. Nonpayment 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-inlaw 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. 8.

Transfers by sale, gift, devise or inheritance qualify for the exclusion. 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. 8.

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

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