A Cautionary Tax Tale for Homeowner Associations
Imagine, if you will, that you are a board member of a homeowner association, where all common elements are owned by the association. One day your board discovers that all of the association's common elements, including all of your privately owned streets, parking areas, green space, gardens, and other amenities are now owned by complete strangers.
This is exactly what happened in Presidio Terrace, an exclusive gated community of 35 multimillion dollar homes located outside of San Francisco, California. The association failed to pay a $14 annual property tax bill for several decades, until the balance crept up to $994.00 in unpaid back taxes, penalties and interest. Unbeknownst to the association, the city foreclosed, and Tina Lam and Michael Cheng, real estate investors with no previous ties to the community, purchased the land for $90,100.00. The couple claims they are exploring their options, which include charging for parking or selling the land back to the association at a profit.
The association claims that the oversight was due to the fact that their tax bill was being mailed to an accountant who had not worked for the association since the 1980s.
How can your association avoid these costly mistakes?
First, verify that your association has the deeds to all common property in its records. If your association does not have copies, they can be obtained from your county recorder. Many counties even allow deeds and other recorded documents to be downloaded from their web site, free of charge.
Second, ensure your tax billing address is up to date, and know where your property tax bills are being sent. This is particularly important if and when your association elects a new treasurer or changes management. This information is readily available on most county auditors' web sites. Promptly update your tax billing information in the event of any changes. Most county auditors' web sites also display current and past property tax bills, so board members can look online and confirm that property taxes are current.
Finally, ensure that your association's statutory agent information is up to date. Ohio is a judicial foreclosure state, meaning all foreclosures (including those for unpaid taxes) must go through the court system. All complaints must be served on the association's statutory agent. Confirming this information is up to date will help avoid default judgment in legal proceedings. As a reminder, all of our firm's clients are encouraged to use K&C Service Corp. as their statutory agent, so that all legal pleadings, etc., will be directed to our office so that we may properly alert your board and avoid Presidio Terrace types of situations.