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Know the Facts about SB 1122 Disclosure Laws
All real estate professionals want to keep their clients happy and ensure a positive experience by avoiding surprises after the sale. When the California Legislature passed Senate Bill 1122 (SB 1122) in 2001, it became the responsibility of Sellers and their real estate agents and brokers to fully disclose all the Special Assessment Taxes associated with the property being sold. A complete property tax disclosure report can eliminate surprises for your Buyer and help to protect you as the selling agent or broker.

The two most important tax disclosures are regarding Mello-Roos and the Improvement Bond Act of 1915.

What are the disclosures and why are they important?
  1. Mello-Roos
    A type of financing used by cities, counties, and special districts to fund improvement projects and services that can include schools, roads, libraries, police and fire protection services. The taxes are billed annually against the property. These special taxes will be charged until the bonds are paid off in full. After the bonds are paid off, a continued charge will occur at a reduced fee to maintain improvements.
     
  2. Improvement Bond Act of 1915
    A 1915 Act bond is for public financing, usually for improvements such as streets, curbs, gutters, underground sewers, and water infrastructure, that generally enhance land value and give land utility. These improvements are usually financed by a developer and the debt of the projects are passed down to the home buyer. The annual property tax bill will include the charges and will need to be paid in full by the specified date. If not paid, a judicial foreclosure process can be made against the property. If the property has a levied 1915 Act bond against it, the information needs to be disclosed by the Seller in the Preliminary Title Report.
What does this mean for the Seller?

The Seller and their real estate agent are required make a good faith effort to provide the Buyer with information about these assessments on a statutory form called a “Notice of Special Tax,” which will contain information such as the amount levied. The Buyer will also sign to acknowledge receipt of the information. This notice will give the Buyer rights to elect not to purchase the property based on the information provided.

What does this mean for the Buyer?

Both Mello-Roos and 1915 Bond assessments are disclosed in the Preliminary Title Report as liens against the property so Buyers should carefully review the title documents for this information.
As your title partner, we’re here to answer any questions you have about Special Assessment Taxes. Please let us know how we can help.

Source: California Tax Data, californiataxdata.com.

This material is not intended to be relied upon as a statement of the law, and is not to be construed as legal, tax or investment advice.  You are encouraged to consult your legal, tax or investment professional for specific advice.  The material is meant for general illustration and/or informational purposes only.  Although the information has been gathered from sources believed to be reliable, no representation is made as to its accuracy. 

 

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