Property Taxes
Ad valorem taxes for real property attach to the property as of January 1 of each year and are posted by the county tax commissioner’s office where the property is situate, usually in the later part of the year or early part of the following year depending on the county. Posting is where the tax commissioner gives notice of the current year’s property taxes due and payment deadline to the property owner of record as of January 1 for same year. In addition, most tax commissioners have the property tax information available online as public records. Once posted, the current year’s property taxes are due.
The collecting and prorating of the current year’s property taxes at closing depends on whether the current year’s property taxes have posted and have been paid. All property taxes for prior years must be paid prior to or at closing. The closing attorney must rely solely on the county tax commissioner’s official records in determining whether taxes are due or paid in full.
In Rem Liens
Property taxes are in rem liens against the real property and not the person(s) owning the property. The property tax attaches to the property on January 1 for each year even though the tax bill is not posted until later in the year. Considered first in line, real property taxes take priority over mortgages, judgments and claims that may have attached to the property. Therefore, any conveyances of real property, refinance or sale, requires the Closing Attorney to prorate and/or collect property taxes in order to clear title, depending on the time of year and whether property taxes have posted.
Tax Assessor
The county tax assessor determines the value of all real property for ad valorem taxes based on its condition and use as of January 1. Any new construction or additions to existing structure erected after January 1 will be considered the following year. The tax assessor will consider only those property tax exemptions filed in the name of the owner, as of January 1, either in a previous year and the use remains the same or timely filed in the current year. Once completed, the tax assessor will mail an assessment notice to the owner as of January 1, no exceptions. This holds true even where the tax assessor has updated its own records to show the current owner is different from owner as of January 1.
Tax Commissioner
The county tax commissioner disburses notices for and collects ad valorem taxes on real property. Property tax bills are posted by the tax commissioner and mailed to the owner of record as of January 1, no exceptions. This holds true even where the tax commissioner has updated its own records to show the current owner is different from owner as of January 1. A due date for payment without penalty is included, but property taxes are considered due upon notice. Most Georgia counties have property tax records available on-line
Refinance
When refinancing the mortgage on real property and the current year’s property taxes have not posted, the Lender usually requires an initial deposit into escrow from the Borrower at closing for the estimated amount based on the prior year’s property tax, the number of months into the year plus two additional months. Once posted, the Lender delivers the full year’s property taxes to the tax commissioner from the Borrower’s escrow account. If the Borrower is not using an escrow account with the Lender for property taxes, then the Borrower is responsible for paying the property taxes upon posting and no property taxes are collected at closing.
Once the current year’s property taxes have posted but have not been paid in full, the balance due is collected from the Borrower at closing. The Closing Attorney delivers the property tax collected at closing to the tax commissioner. In some cases where the current year’s property taxes are scheduled to post within sixty days after closing, the Lender requires the Borrower to pay at closing an estimated amount for the current year based on the prior year’s property taxes. When the current year’s property taxes are posted, the Closing Attorney delivers the property tax collected at closing to the tax commissioner. The Borrower is responsible for making payment for any shortage between the amount collected at closing and the posted amount due. Conversely, the Closing Attorney returns to the Borrower any overage amount collected at closing above the posted amount due.
If the tax commissioner’s record confirms the current year’s property taxes are paid in full, then no property taxes are collected at closing for the current year. However, the Lender usually requires an initial deposit of two months prorations based on the current year’s property tax into escrow from the Borrower at closing for the following year’s property taxes. If the Borrower is not using an escrow account with the Lender for property taxes, then the Borrower is responsible for paying the following year’s property taxes upon posting and no property taxes are collected at closing.
Purchase & Sale
When purchasing or selling real property, the current year’s property taxes will be prorated between the Buyer and Seller at closing based on the closing date, unless the contract specifies differently. Most standard contracts call for the current year’s property taxes to be prorated in this manner. If the current year’s property taxes have not posted, the Seller credits to the Buyer at closing the Seller’s estimated share of the current year’s property taxes from January 1 through the closing date based on the prior year’s property tax. The Buyer is then responsible for paying the full current year’s property tax upon posting. If the actual current year’s property tax is different from the estimated amount at closing, then most standard contracts call for the parties to re-prorate between themselves. Some contracts state that the tax prorations at closing are final with no re-prorations if the actual taxes are different from the estimate at closing. This case is common when purchasing REO or bank owned properties.
If the current year’s taxes are posted but not paid in full, the prorations between Purchaser and Seller are based on the actual amount and the Closing Attorney collects and delivers from closing the balance due to the tax commissioner. If the current year’s taxes are posted and paid in full, the prorations between Purchaser and Seller are based on the actual amount.