New Jersey taxes not paid by builder

[sabt]

New Jersey (my first post)

I bought a new home in May 2006. The property taxes was approx $8,800. The builder of the house only paid abut $1,100 in taxes. Since I bought it in May, I should have only paid 8 months. Instead I paid about 10 months. I overpaid 2 months of taxes ($1,700). The town forced me to pay $7,700 in the third and fourth quarter of 2006 through my mortgage bank (apparently, this stupid town and some other supid towns in jersey collect property taxes in the third and fourth quarters only). The builder refuses to pay because he says that the house shouldn't have been assessed fully until the certificate of occupancy was issued (April 15, 2006). The town is saying that they had every right to assess the property at its full value when the frame of the house went up (late 2005). I think the town is right and the builder owes me about $1,700. What are my options? Small claims court? thanks!!!!

When I bought the house, everyone at the table assumed that the taxes were taken care of, including my stupid lawyer, who was a moron.

[nextwife]

What did your offer to purchase state as to property tax proration? Was the closing statement done in accordance with the offer language?

[seniorjudge]

...When I bought the house, everyone at the table assumed that the taxes were taken care of, including my stupid lawyer, who was a moron....

But, you, of course, were smart enough to ask for something in writing, correct?

[sabt]

Originally Posted by seniorjudge

...When I bought the house, everyone at the table assumed that the taxes were taken care of, including my stupid lawyer, who was a moron....

But, you, of course, were smart enough to ask for something in writing, correct?

nice try...i pay lawyers to do their job correctly...that's why i hire lawyers...i pay them...get it???

[sabt]

Originally Posted by nextwife

What did your offer to purchase state as to property tax proration? Was the closing statement done in accordance with the offer language?

can you rephrase the first question?

[nextwife]

The way that taxes are handled for a property that would not have been fully assessed as of the date of closing is laid out in the language of the offer to purchase. You need to go back and review what the offer you presented to the seller stated. Then you need to review your closing statement to SEE if the closing proration was done the way your offer required.

You are the party that decided to present the seller with an offer. What language did you have put in your offer to address the numbers the proration would be based upon?

Here is an example of proration language from the WB11 WI offer. Your exact offer language may have varied based upon your state's offer, but something gets written into the offer that establishes how the closing agent calculates the proration, or if a holdback occurs.:

The following items shall be prorated at closing: real estate taxes, rents, water and sewer use charges,
45
garbage pick-up and other private and municipal charges, property owner's association assessments, fuel and _______________
46
_______________________________. Any income, taxes or expenses shall accrue to Seller, and be prorated, through the day
47
prior to closing. Net general real estate taxes shall be prorated based on (the net general real estate taxes for the current year, if
48
known, otherwise on the net general real estate taxes for the preceding year ) (__________________________________________
49
________________________________________________________________).
50
CAUTION: If proration on the basis of net general real estate taxes is not acceptable (for example, completed/pending
51
reassessment changing mill rate, lottery credits), insert estimated annual tax or other formula for proration.

[sabt]

Originally Posted by nextwife

The way that taxes are handled for a property that would not have been fully assessed as of the date of closing is laid out in the language of the offer to purchase. You need to go back and review what the offer you presented to the seller stated. Then you need to review your closing statement to SEE if the closing proration was done the way your offer required.

You are the party that decided to present the seller with an offer. What language did you have put in your offer to address the numbers the proration would be based upon?

Here is an example of proration language from the WB11 WI offer. Your exact offer language may have varied based upon your state's offer, but something gets written into the offer that establishes how the closing agent calculates the proration, or if a holdback occurs.:

The following items shall be prorated at closing: real estate taxes, rents, water and sewer use charges,
45
garbage pick-up and other private and municipal charges, property owner's association assessments, fuel and _______________
46
_______________________________. Any income, taxes or expenses shall accrue to Seller, and be prorated, through the day
47
prior to closing. Net general real estate taxes shall be prorated based on (the net general real estate taxes for the current year, if
48
known, otherwise on the net general real estate taxes for the preceding year ) (__________________________________________
49
________________________________________________________________).
50
CAUTION: If proration on the basis of net general real estate taxes is not acceptable (for example, completed/pending
51
reassessment changing mill rate, lottery credits), insert estimated annual tax or other formula for proration.

The property, according to the town, was already fully assessed months before the closing. Again, the town collects during the 3rd and 4th quarters only. So, the builder paid his taxes (land only) in the 3rd and 4th quarter of 2005 and didn't pay in the 1st and 2nd quarter of 2006 (building and land since the house was fully assessed in beginning of 2006). Here's what my contract states:

13. Real Estate Taxes, Utilitiy Charges, Assessments:
(a) Real estate taxes and utility charges shall be apportions as of the date of closing, which means that Seller will pay real estate taxes and utility use charges assessed against the property for that period of time prior to closing. Any utility deposits will be the responsibility of the Buyer.
(b) Assessments - Prior to construction of a dwelling, the property has been assessed as land only with or without subdivision improvements. Any and all added assessments imposed by the municipality following the date of closing in connection with the improvement to the property shall be the responsibility of the Buyer and shall be paid by Buyer at and following the time of closing, and thereafter apportioned by the parties with the Seller paying any assessment for the period of time prior to the closing.

the town had already fully assessed the house BEFORE the closing...

[nextwife]

Originally Posted by sabt

The property, according to the town, was already fully assessed months before the closing. Again, the town collects during the 3rd and 4th quarters only. So, the builder paid his taxes (land only) in the 3rd and 4th quarter of 2005 and didn't pay in the 1st and 2nd quarter of 2006 (building and land since the house was fully assessed in beginning of 2006). Here's what my contract states:

13. Real Estate Taxes, Utilitiy Charges, Assessments:
(a) Real estate taxes and utility charges shall be apportions as of the date of closing, which means that Seller will pay real estate taxes and utility use charges assessed against the property for that period of time prior to closing. Any utility deposits will be the responsibility of the Buyer.
(b) Assessments - Prior to construction of a dwelling, the property has been assessed as land only with or without subdivision improvements. Any and all added assessments imposed by the municipality following the date of closing in connection with the improvement to the property shall be the responsibility of the Buyer and shall be paid by Buyer at and following the time of closing, and thereafter apportioned by the parties with the Seller paying any assessment for the period of time prior to the closing.

the town had already fully assessed the house BEFORE the closing...

So how much of a credit was collected from the seller on the closing statement toward tax payment?

[sabt]

Originally Posted by nextwife

So how much of a credit was collected from the seller on the closing statement toward tax payment?

none, because we thought that all taxes were paid by the Seller, or at least that's what the Seller is saying...obviously it's not true since 2006 taxes are not collected until 3rd and 4th quarters. We were unaware that the town collects at the second half of the year.

[seniorjudge]

Sue the bad person in small claims court.

It's obvious we cannot get it settled here.

[nextwife]

Originally Posted by sabt

none, because we thought that all taxes were paid by the Seller, or at least that's what the Seller is saying...obviously it's not true since 2006 taxes are not collected until 3rd and 4th quarters. We were unaware that the town collects at the second half of the year.

Maybe they do things differently in your state, but wasn't a tax status letter obtained from the municipality in advance of the closing to confirm what, if any, balance remained on any municipal accounts, such as taxes, water, sewer, whether any municipal work had been done that would result in a special assessment? I've been involved in RE closings since 1979, and I've never seen a closing done in which the closing agent or title company simply presumed taxes were paid. They get back up documentation.

Anyway, normally, a seller is only responsible for 2006 taxes from first of the year to date of closing and PRIOR years- based upon the terms for the proration in your offer. Property taxes in your area are paid "in arrears", I presume? That means the bill for 2006 taxes comes at the END of 2006?

If so, seller is ONLY responsible for 2006 taxes up to the date of closing, you'd be credited a proration on the closing statement, and you'd pay the future tax bills when they come.

You did not write the the full proration terms, only the language dealing with special assessments.

[nextwife]

Originally Posted by seniorjudge

Sue the bad person in small claims court.

That only makes sense IF the seller failed to perform in accordance with the offer. This poster still has not established what basis the offer required proration to be done. I still haven't seen the portion of the offer that states WHAT NUMBERS the proration would be based upon. Prior year? What?

13. Real Estate Taxes, Utilitiy Charges, Assessments:
(a) Real estate taxes and utility charges shall be apportions as of the date of closing, which means that Seller will pay real estate taxes and utility use charges assessed against the property for that period of time prior to closing. Any utility deposits will be the responsibility of the Buyer.
(b) Assessments - Prior to construction of a dwelling, the property has been assessed as land only with or without subdivision improvements. Any and all added assessments imposed by the municipality following the date of closing in connection with the improvement to the property shall be the responsibility of the Buyer and shall be paid by Buyer at and following the time of closing, and thereafter apportioned by the parties with the Seller paying any assessment for the period of time prior to the closing.

[sabt]

I don't see a section discussing proration. here are the sections:
1. purchase agreement
2. property
3. construction of dwelling
4. purchase price
5. payment of purchase price
6. deposit of moneys
7. escrow agent and deposit
8. options/extras
9. mortgage contingency
10. title
11. site visits
12. damage by fire or other casualty
13. real estatae taxes, utility charges, assessments
14. defautls by buyer and seller
15 closing of title
16 delay in complettion, impossibility or completion
17 changes in plan or material - substitutions
18 severability of contract clauses
19 subordination and assignment
20 warranties
21 brokerage
22 condition of premises
23 survey
24 closing charges
25 possession
26 changs in construction
27 placement of the house and landscaping
28 complete agreement
29 use of terms
30 parties liable
31 captions
32 notices
33 condominium conversion
34 affidavit of buyer

Originally Posted by nextwife

That only makes sense IF the seller failed to perform in accordance with the offer. This poster still has not established what basis the offer required proration to be done. I still haven't seen the portion of the offer that states WHAT NUMBERS the proration would be based upon. Prior year? What?

13. Real Estate Taxes, Utilitiy Charges, Assessments:
(a) Real estate taxes and utility charges shall be apportions as of the date of closing, which means that Seller will pay real estate taxes and utility use charges assessed against the property for that period of time prior to closing. Any utility deposits will be the responsibility of the Buyer.
(b) Assessments - Prior to construction of a dwelling, the property has been assessed as land only with or without subdivision improvements. Any and all added assessments imposed by the municipality following the date of closing in connection with the improvement to the property shall be the responsibility of the Buyer and shall be paid by Buyer at and following the time of closing, and thereafter apportioned by the parties with the Seller paying any assessment for the period of time prior to the closing.

[lcannister]

The builder refuses to pay because he says that the house shouldn't have been assessed fully until the certificate of occupancy was issued (April 15, 2006).

That is exactly how it work in my neck of the woods. Perhaps he is new to your area and is not familiar with the tax system. However, I would make sure who is actually right in this matter.

Should be pie easy for an Atty to answer this question in a matter of seconds, not mainutes!

[sabt]

Originally Posted by lcannister

That is exactly how it work in my neck of the woods. Perhaps he is new to your area and is not familiar with the tax system. However, I would make sure who is actually right in this matter.

Should be pie easy for an Atty to answer this question in a matter of seconds, not mainutes!

the builder lives in the town! he knows how it works...he keeps saying that this has never happened...i know he's lying...I'm just the first one to catch him...the town assessor, collector and the builder are all good friends...the collector himself told me he's good friends with the builder.