Property taxes are a fact of life for most real estate owners. Publicly held property, however, including that owned by the federal government (ORS 307.040) and state and local government (ORS 307.090) is exempt from property taxes. What happens when an exempt entity takes title to property that is still encumbered with outstanding tax debt? In many cases, the answer is “nothing.”
HB 2127 (effective 10/2015) is an attempt to resolve this issue. Sometimes, property owned by a taxable owner is sold or otherwise transferred to an exempt owner without clearing the outstanding tax debt. The unpaid taxes appear as a lien against the property and continue to accrue interest charges, but once a governmental entity gains title, the county loses its ability to collect. The delinquency remains on the tax rolls and the county cannot foreclose on the property. As a result, there is little, if any, incentive for either party to ensure that legally assessed property taxes are paid prior to sale. [2]
HB 2127 includes three ways to address this problem:
- First, Section 1, subsection 2 provides that“a county clerk may not record . . . an instrument conveying . . . title to real property” to an exempt entity under ORS 307.040 or 307.090 without “a certificate issued by the assessor of the county in which the real property is located attesting that all charges against the real property as of the date of the recording have been paid.” The grantor must obtain this certificate before recording the deed.
- Second, Section 1, subsection 4 states that with “written instructions from the transferor, an authorized agent in a conveyance may withhold” the amount of outstanding debt against the property, as of the date of the conveyance, from “the consideration payable to the transferor.” Authorized agents might be title agents, attorneys, etc.
- Third, Section 1, subsection 6 changes the nature of the delinquency. “Notwithstanding ORS 311.405, [the amount due] is not a lien on the real property;” instead, it becomes “a personal debt of the person who has conveyed . . . the real property” and be “collected as provided by law for the collection of delinquent property taxes on personal property.” [1]
HB 2127 only relates to transfers of real property from private owners to public, exempt entities. Contact the local assessor’s office with questions about this new law.
[1] https://olis.leg.state.or.us/liz/2015R1/Downloads/MeasureDocument/HB2127/Enrolled
[2] https://olis.leg.state.or.us/liz/2015R1/Downloads/CommitteeMeetingDocument/70098