Jun 16, 2014

Tip 10-2014: Have Taxes Been Paid?

Any time property is purchased or sold, the parties involved in the closing need to address the payment of the real estate taxes. This is usually handled by prorating the current taxes and allowing the purchaser to pay the taxes when they are due. But, what happens when the closing occurs around the approximate time that taxes need to be paid? (Taxes are usually due June 5th and December 5th).

It is possible that taxes may be paid by both the seller's lender and the buyer's attorney or settlement company. Calling the Treasurer's Office may not result in the most up to date information. The seller's lender will probably send one tax payment check to cover hundreds of properties. As a result, that check may not post to the account of the property in question by the time the closing date arrives, leaving the parties to believe that the taxes have not been paid.

Subsequently, the seller gives the purchaser a tax credit, and the purchaser also pays the taxes. If the taxes are double-paid, a refund check will usually be issued to the last party who made a payment. Tracking down the true owner of the refund can prove tedious and time-consuming.

Accordingly, the best practice is to have the seller verify with his lender if the taxes have already been paid (some written proof may be necessary). Checking with the lender will provide the most current information and will save everyone the headache of dealing with a refund!
Contact me at 434-951-0858 or Tucker@TGBLaw.com if you have questions.

William D. Tucker, III
Tucker Griffin Barnes P.C.
Charlottesville, VA

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