Florida’s recording statute gives priority to the real property lienholder who is first to record in the public records of the county where the property is located. There are certain limited exceptions to this general rule. One of the exceptions that most mortgage lenders doing business in the state of Florida are familiar with is the exception for the first lien priority created by Florida statutes for ad valorem or real estate taxes assessed by the property appraiser against real property.

Previously, mortgage lenders could accurately quantify the amount of the potential prior lien for unpaid real estate taxes that could prime their lien by examining county tax records. However, under the very recent case of Miami-Dade County vs. Landowne Mortgage, LLC, 2017 Fla. App. Lexis 14751 (3rd DCA), this analysis may no longer be accurate when refinancing an existing homeowner. In the case, Miami-Dade County filed a 2014 tax lien against the property on which Landowne had previously secured its first mortgage in 2007. The 2014 Miami-Dade tax lien imposed against the property was for up to 10 years worth of improper homestead exemptions previously received by the present owner of the property during his prior years of ownership. Florida Statutes, Section 196.161 allows property appraisers a look back period of 10 years to recoup the amount of any homestead exemptions improperly received, plus a 50% penalty and 15% interest. However, prior to this most recent ruling, it was not clear that a tax lien filed against a property for improperly received homestead exemptions would have a retroactive effect, which would prime the prior recorded lien of a mortgage granted by a lender who had no knowledge of the existing property owner’s improper claim of a homestead exemption.

This problem does not arise in connection with loans to homeowners who are buying a home and obtaining purchase money financing (as opposed to refinancing an existing loan) because the tax lien for improperly received homestead exemptions will only attach to the property owned by the non-exempt owner at the time the tax lien is filed. Prior to the filing of a tax lien of this nature, any purchaser for value of the property on which the improper homestead exemption was claimed will take free and clear of this retroactive tax lien.

Cash strapped local governments aided by ever improving data gathering techniques and the Miami-Dade County vs. Landowne Mortgage, LLC decision may  increasingly turn to real estate tax revenues presented by improperly claimed homestead exemptions. Accordingly, residential mortgage lenders who are refinancing loans for existing homeowners should seek advice from loan counsel who can effectively address this new landscape.

taxes[1] (00155358)

        It’s that time of year again. Property owners, whether office, retail, apartments and residential have received or will shortly receive by mail the Truth in Millage Act (TRIM) notice for 2016 ad valorem real property tax assessment. The purpose of the TRIM notice is to advise you of what the county property appraiser has determined to be the value of your real property and advise you of the minimum and maximum tax rates that will then apply.  As the tax millage rates are determined by action of the local government agencies, such as the county, municipality and improvement districts, the only means of contesting those rates is at the voting booth. However, assessed value may be challenged.

            Some basics:

  • Ad valorem real property taxes are based on the value of your real property on January 1st of each year. So, taxes for 2016 are based on the value of the property determined as of January 1, 2016.

 

  • Tax rolls close in June of the tax year and TRIM notices are mailed in August.

 

  • Tax bills are mailed in November with taxes being delinquent after March 31st of the following year. Paying early can yield up to a 4 percent discount on the base tax amount, with the discount declining by 1 percent per month. The tax bills are essentially paid in arrears; taxes billed in November 2016 and payable through March 2016 represent 2016 real estate taxes.

 

            If you believe that you may have been over-assessed, there are several procedures to challenge the assessed value set forth in the TRIM notice.  A property owner may request an informal conference with the county property appraiser at any time during the year. An informal conference is most often successful if there is critical information that may not have been available to the property appraiser’s office prior to determining value (such as damage that may have substantially reduced business income from the property).

            The most common approach is to file with the clerk of the county Valuation Adjustment Board a petition challenging the valuation.  You have 25 days from the county’s mailing date of the TRIM notices to file a petition to administratively contest this year’s assessment. The county-specific filing deadline is noted on the TRIM notice itself.  The deadlines in South Florida for filing a petition this year are:

  • Broward County:              September 19

 

  • Miami-Dade County:       September 19

 

  • Palm Beach County:         September 15

 

With a relatively short appeal period, it is important to file the petition to avoid missing the opportunity of the administrative process. The alternative if the deadline is missed is to file a civil action; a much more expensive procedure.

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