Q: We settled on the sale of my moms house on 1/2/18. Signed all docs, collected funds and thought that was it.
UPDATE IN CAPS! About 4 weeks after the closing the settlement attorney called stating we owed an additional 5% transfer tax totaling $34k related to a rezoning in 1985. We had no idea AND THERE WAS NO WAY OF KNOWING SINCE THERE WAS NO LIEN, NO NOTICE, NO NOTATION OR ANY INDICATION THAT THERE WAS ANYTHING DIFFERENT WITH THIS PROPERTY. While we dispute the assessment on several grounds, what responsibility did the settlement company have? Should this of not been disclosed prior to, or at the closing? Not 4 weeks later? CASE LAW FOUND IN OTHER STATES PUTS A MISTAKE LIKE THIS ON THE SETTLEMENT COMPANY. WOULD IT OF MADE A DIFFERENCE? A BROTHER WAS INTERESTED IN BUYING IT BUT WE DECIDED TO LIST IT. AN ENTRA $34K HIT WOULD OF MADE A DIFF IN HIS THINKING SINCE WE WOULD OF AVOIDED THE TRANSFER TAX. THEY ALSO MADE NO ATTEMPT TO ASCERTAIN WHAT THE TAX DUE WAS BY CONTACTING THE COUNTY - WHICH IS WHAT THE COUNTY SAID SHOULD OF OCCURRED & IS THEIR RESPONSIBILITY.
A: The tax was imposed against the property in 1985, so you cannot blame the settlement company for the tax. As sellers, it is also your obligation to transfer the property free and clear of all past due taxes and liens, which having failed to do, you are in breach and the buyers can sue to rescind the purchase or demand that you reimburse them for having to pay the tax lien. The buyers also have recourse against their title insurer who wrote the title insurance police, which is on the hook to pay off the tax lien, and then the title insurer will subrogate the claim against you to collect it. The settlement attorney has the right to rely on the title insurer's title search, and is only acting as an escrow agent for the parties. The fact remains, had the tax lien been discovered before the sale, you'd still owe the tax--so what remedy are you asking for? Would you have been able to cancel the sales contract? Unlikely. Would you have chosen not to sell the property in the first place? You'd still owe the tax. It is unfortunate that this happened, but in the end, the tax remains a lien on the property, and it is the seller's obligation to satisfy it.
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