About Special Assessment Tax in Real Estate
Real estate is a significant investment for many people, and property owners are subject to a variety of taxes, including property taxes, income taxes, and capital gains taxes.
One lesser-known tax that property owners may encounter is the special assessment tax. This tax can be confusing, but it’s important to understand what it is and how it works.
What is a Special Assessment Tax?
A special assessment tax is a tax levied on property owners for a specific purpose, such as to fund improvements or repairs to public infrastructure or facilities.
These assessments are typically levied by local governments, such as cities or counties, and are intended to cover the costs of improvements that will benefit the property owners in the area.
Special assessments are different from property taxes in that they are generally earmarked for a specific project or purpose, whereas property taxes are used to fund a wide range of public services and are based on the overall value of the property.
Special assessments are also different from impact fees, which are one-time fees paid by developers to offset the cost of new infrastructure that is needed due to the development.
How Does a Special Assessment Tax Work?
When a local government decides to undertake a project that will be funded by special assessments, the first step is to identify the area that will benefit from the project.
This may be a specific neighborhood, a commercial district, or a wider area that will be impacted by the project.
Once the area has been identified, the local government will typically hold public hearings to gather input from property owners and other stakeholders.
The purpose of these hearings is to determine the scope of the project and the estimated cost, as well as to solicit feedback from the community.
After the public hearings, the local government will typically adopt a resolution or ordinance that outlines the details of the special assessment.
This may include the specific improvements or repairs that will be made, the estimated cost of the project, and the method for calculating the assessments.
The assessments may be based on a variety of factors, such as the square footage of the property, the frontage of the property, or the assessed value of the property.
The local government may also take into account any special circumstances, such as vacant lots or properties that are not connected to the public infrastructure that will be improved.
Once the assessment method has been determined, the local government will notify property owners of the amount they will be assessed. The assessments may be paid in a lump sum or installments over a period of years.
In some cases, property owners may be allowed to pay off the assessment early without penalty.
What Projects Can Be Funded by Special Assessments?
Special assessments can be used to fund a wide range of public projects, including:
- Road improvements, such as repaving, widening, or adding bike lanes.
- Sidewalk improvements, such as adding new sidewalks or repairing existing ones.
- Water or sewer infrastructure improvements, such as replacing aging pipes or building new treatment facilities.
- Parks or recreation facilities, such as building a new playground or improving existing amenities.
- Street lightings or landscaping improvements, such as adding trees or decorative streetlights.
The specific projects that can be funded by special assessments will vary depending on the local government and the needs of the community.
Examples of Special Assessment Taxes
To better understand how special assessment taxes work, let’s take a look at a few examples.
Example 1: Road Construction
The city of Springfield decides to build a new road that will benefit the entire community.
To fund the project, the city decides to levy a special assessment tax on all properties within a designated area that will benefit from the new road.
The city determines that the total cost of the project will be $1 million. They also determine that there are 1,000 properties within the designated area.
To determine the amount of the special assessment tax, the city divides the total cost of the project by the number of properties within the designated area.
In this case, the special assessment tax would be $1,000 per property. Property owners would have the option to pay the tax in full or to make payments over time.
Example 2: Park Improvements
The town of Greenfield has a popular park that requires some improvements. To fund the improvements, the town decides to levy a special assessment tax on all properties within a designated area that will benefit from the park improvements.
The town determines that the total cost of the improvements will be $500,000. They also determine that there are 500 properties within the designated area.
To determine the amount of the special assessment tax, the town divides the total cost of the improvements by the number of properties within the designated area.
In this case, the special assessment tax would be $1,000 per property. Property owners would have the option to pay the tax in full or to make payments over time.
Conclusion
A special assessment tax is a type of tax that is levied on a property owner by a government agency to fund infrastructure projects or public works that benefit the community as a whole.
About Bundle of Rights
If you are looking to purchase a new property, you need to know how the different property rights are read when you receive the title of the property.
On you purchase a real estate property; you will receive the title stating that you are the rightful owner of that property.
Along with the title, you would also receive rights that define how the property is to be used known as the bundle of rights.
In This post, we will understand everything about the bundle of rights in detail.
What Is The Bundle Of Rights?
When you buy or own a property, you get a bundle of rights that defines what you can (or can’t) do with it.
Apart from the right of ownership, this bundle often includes the right to, rent, use, remove, sell, profit, demolish or develop the property. Ownership rights may vary based on local or state laws.
In most cases, the title holder has the right to use, manage and enjoy the property in any way permitted by law, although some restrictions may be imposed.
A landlord’s rights may be limited in certain circumstances, such as if property taxes are unpaid.
In another example, playing music above a certain decibel may not be allowed due to zoning regulations or homeowner association covenants.
How Does The Bundle Of Rights Work?
The average buyer can expect the entire bundle of legal rights once the transaction is complete.
In other words, home buyers expect to have the right to control, possession, enjoyment, exclusion, and disposition.
However, these rights can be broken down and assigned to different entities. This usually applies to the purchase of commercial property and investment.
For example, a buyer of a rental property may have rights that are restricted by the rules and regulations for landlords and tenants, or a storefront property owner may share certain rights with a tenant who operates a business at that property.
In any case, the owner’s bundle of legal rights can only be done within the limits of several other laws.
For example, an amenity owner’s enjoyment rights cannot be exerted beyond the limits of local noise control laws.
What Type Of Rights Are Included In The Bundle Of Rights?
Five basic rights are included in the bundle of legal rights in real estate
1 - Possession Rights:
Possession rights are very simple; it refers only to the right to own or possess property. If you are a titleholder, you are the legal owner of the property.
2 - Control Rights:
Control rights are your right to use or control the use of the property. This can include things like making changes or renovations to the property, Inviting guests over to your house or to live with you, or renting it out for income.
If you live in a Home Owner’s Association-governed community, the HOA rules may impose certain limitations on this right.
For example, you can’t paint your house a bright color or keep pets in your house if the HOA rules are against it. Local laws may also affect your control rights.
Based on the zoning plans in your area, for example, you might not be able to conduct commercial activities or run certain businesses.
3 - Enjoyment Rights:
Being a homeowner can be exciting. And as an owner, you deserve to enjoy your ownership the way you want.
The enjoyment right gives you the right to legally enjoy your property as you wish.
For example, you may choose to host a party in your home, as long as you don’t violate local noise laws.
4 - Disposition rights:
This right enables the homeowner to dispose of the property as per their will. This means you have the right to sell it or pass it on to someone they want to.
This right of disposition could be limited to or discarded if you have a lien like a mortgage on your property.
You have to pay off the mortgage balance in full from the proceeds that you will receive from the sale in such a case.
5 - Exclusion Rights:
A landlord has the right to prevent others from entering his house or personal property.
However, the exclusive rights have many exceptions, including easements for utility companies so that they can carry on repairs and maintenance for the utilities on the part of the property.
Another example could be for law enforcement officers with a legal warrant to search your property for any ongoing investigation.
Conclusion
If you are a first-time home buyer, knowing about the bundle of rights in real estate can help you to understand the best ways to use your property.
These rights may change based on your intention to use, such as commercial, rental, or primary.
Zoning plans, HOA rules, and share rights with storefronts and tenants can impact these rights.
Introduction to Real Estate Attorney
When you are buying or selling a property, there are many legal terms included in the transaction that a buyer or a seller might not be aware of.
A home purchase is a legal transaction where the title of the home is transferred from one person to another.
A home purchase is a complex process in which you may need help to ensure a smooth and uninterrupted process.
Hence, having a real estate attorney would help you to get through the purchase transaction smoothly. In this post, we will learn more about real estate attorneys in detail.
What is a Real Estate Attorney?
A real estate attorney is an individual who has the experience and is certified to practice real estate law in a specific area.
A buyer or a seller can hire a real estate lawyer when they are getting a purchase agreement signed.
It is advised to have a real estate attorney by your side to ensure you have a person available to give you solutions in case of any legal discrepancy.
What does a Real Estate Layer do?
Real estate attorneys do a variety of things when it comes to real estate. From handling money exchange to registering mortgages.
Title transfers, change of parcels of land, etc. are some of the things that a real estate lawyer takes care of.
A property attorney’s job could be broad, or it could be narrowly focused on one area.
The primary responsibility of a real estate lawyer is to conduct title searches and other related searches relating to your property.
If often happens is that there would be a mortgage of the seller which is sitting on the title, so your property attorney will prepare a letter, putting a condition on the seller’s lawyer to make sure that all those mortgages liens and encumbrances are removed so that you can get a clear title of the property.
Other responsibilities of a real estate lawyer are applying to your first-time homebuyer’s rebate, calculating your land transfer tax, preparing all documents for your transfer, preparing all the documents related to the mortgage if you are taking one, and the most important task of the real estate attorney would be to collect the funds from you and collect the funds from the lender and securely transfer them to the seller’s account.
The attorney would also register the transfer and the mortgage under your name and provide you with the report saying these are your title documents, here it shows that you are the buyer and provide you with the statement of adjustments and financial documents.
If you are a seller and hiring a real estate attorney for the same, the key responsibilities of the attorney would be, presuming that you have a mortgage, your attorney will request a payout statement.
In the case of a HELOC, the attorney will request for the payout of HELOC that is registered against the property.
If you have used a realtor, your lawyer is going to reach out to your realtor and request a Commission Statement.
Your lawyer is also going to prepare sales documents related to the transaction. On the date of closing your lawyer will receive the funds, pay off the mortgage or any liens, payout the realtor prepare, the check for the balance sale proceeds for you as a seller to collect.
How to find a good Real Estate Attorney?
The best way to find the best real estate attorney in your area is to speak to your family and friends as they are a great resource, and ask them if they have dealt with a real estate attorney before and whether or not they would recommend them to you and why. Your real estate agent is also a great resource.
Realtors deal with real estate lawyers all the time. Ask your realtor if he/she has any recommendations. Ask the realtor why he/she would or would not recommend a specific lawyer to you.
You can also cross-check the information that you got from your family and friends and realtor by doing your research online.
Visit the attorney’s profile on Google, LinkedIn, BBB, and other online portals to understand if the attorney deals with the type of transaction that pertains to yours and what the clients have to say about their service.
You can also call the lawyers to understand things like fees, years of experience in the real estate field and also confirm if they are doing this practice full time or part-time.
If you do not get any leads, don’t worry. You can start your search from BAR Association Directory.
Every state has a BAR association website where all the attorneys are registered with their specialization. This would help you to kick start your search for the right property attorney.
Conclusion
Buying or selling a home is one of the biggest financial decisions that an individual has to take.
Considering the legal factors that are included in a property sale transaction, you would need to ensure that you have the right team to assist you in the legal difficulties throughout the process.
A real estate lawyer is the person who helps you to make your transaction hassle-free and also gives you peace of mind by having a professional legal advisor by your side.