So, in the particular problem presented thsi week, I sent the consultant on a quest to get information from his client.

If it is determined that a real tax certificate was obtained at closing, then the owner might be able to tell the tax assessor "not my problem." Because the taxes relate to a period of time before the current owner's title, there would be no personal liability. And because of the true tax certificate, there would be no tax lien on the property to worry about clearing.

Unfortunately, based on past experience with similar situations, I suspect that a resolution is not going to be that easy. More than likely, instead of paying $10 for a real and useful tax certificate, the title company likely paid a multiple of that amount for a useless document. (I am makiing the assumption that the charge on the closing statement for a tax certificate is truly the cost paid by a title company with no markup. Not having ever worked for a title company, I have no idea what their policies and procedures are in this regard.)

So, assuming the owner has lost the protection that would have been obtained with a real tax certificate, what are the options?

Of course, he or she could try to sue the previous owner on a breach of warranty claim based on the real estate transaction. That will depend though on such things as the warranty terms of the deed, the terms of the real estate contract, and whether the owner even still exists. This last point is not as much a given as you might think as many commercial properties are owned by single-asset entities, set up for the sole purpose of owning that particular real estate, and having their existence forfeited soon after the asset is sold.

Another potential option is the title insurance company if a title insurance policy was obtained. That's where the third question comes in. Title insurance is supposed to protect a purchaser against any potential title flaws, including liens, that might be found to impair the title.

In many cases, the title company will do everything it can to try to include an exception in the policy and avoid any liability that might arise due to tax issues. They, of course, exclude any taxes for future years; and unless taxes are paid or escrowed at closing, also for the current year. And if they are aware of the potential for rollback taxes, they will exclude those as well.

The question becomes how broad the wording of the exclusions are. (And also, in my opinion, perhaps whether the title company induced the purchaser to buy a title policy and accept a tax exclusion in reliance on a tax certificate that turned out to be worthless for the problem that has arisen. But as that is not my area of law, I will leave that fight to others.)

Also, regardless of the exclusion's wording, one can expect the title company to try to argue its way out of any liability, especially if the taxes at issue are a significant amount. In the specific case this week, I understand we were talking in excess of $200,000.

I would anticipate a title company's first lines of defense might be claims that the taxes were not assessed until after closing and thus there was no lien on the property for those taxes at the time of closing.

However, Section 32.01(a) of the Tax Code provides: "On January 1 of each year, a tax lien attaches to property to secure the payment of all taxes, penalties, and interest ultimately imposed for the year on the property, whether or not the taxes are imposed in the year the lien attaches."

Based on this language, it would appear that the omitted property tax lien actually relates back to January 1 of the year of omission. Therefore, the lien existed prior to the date of closing. A real tax certificate could have wiped out that lien, avoiding the problem.

An interesting legal fight perhaps. But as said previously, a fight for others.

As a property tax attorney, I get calls and emails from property owners and tax consultants inquiring about property tax issues. Most often the inquiry recites a certain set of facts, a problem that has arisen regarding those facts, and "how can I fix it?" Of course, not every problem can be fixed.

Often, multiple inquires will involve a similar set of facts and a similar problem. I handled such an inquiry this week; handled not in the sense of resolving the problem but instead sending the consultant on a quest for more information.

The set of facts was one repeated many times over the years: a client purchased a piece of property and assumed everything was okay with the taxes. And the problem now existing has also been repeated several times over the years: a year or so after the purchase the appraisal district has given notice of omitted property and the intent to increase the tax assessment for years prior to the current owner's acquisition of title.

When such facts and problem presents itself, I might not know if the problem can be resolved (the truth is that, if there really was omitted property, it probably cannot be fully resolved); but I do know what three questions need to be asked immediately of the owner:

1. Did you get a tax certificate when you purchased the property?
2. Is it a real tax certificate?
3. Did you obtain a title insurance policy?

Much too often, the answer to the first question is "yes" and the answer to the second question ends up being "no." I'll address the third question later.

At closing, the purchaser of real estate will likely receive among the many pieces of paper being passed by him or her a document described as and perhaps even entitled "Tax Certificate." This document will indicate what if any property taxes are shown as being delinquent on the property, how much the taxes for the current year are (or perhaps an estimation if closing is prior to the current year assessment), and that there has or has not been any special appraisal valuations that might result in rollback taxes being issued (most commonly, open space or agricultural use valuation).

The seller or purchaser will also be assessed a charge for this document, a fee on the closing statement that will vary depending on the title company. A quick search online revealed title company fee estimates of as little as $20 to as much as $55 for a tax certificate, but it could potentially be higher.

And what is the value of this certificate? In many cases, zero.

The fact is that a purchaser of real estate can go to the local tax assessor and receive a true tax certificate for a charge of $10. And that real tax certificate could provide at least some protection for the purchaser.

Specifically, Section 31.08(b) of the Texas Tax Code provides that when the transfer of property is accompanied by a real honest to gosh tax certificate from the tax assessor and that certificate "erroneously indicates that no delinquent taxes, penalties, or interest are due a taxing unit . . . or . . . fails to include property because of its omission from an appraisal roll," then the tax lien on the property is extinguished and the purchaser is absolved of liability for the back taxes including the taxes subsequently assessed for omitted property.

In other words, the seller will have personal liability for those taxes because he or she owned the property on January 1 of the omitted property year; but the purchaser will have no personal liability for the omitted property tax and also will not face the risk of having to pay off the taxes in order to clear a lien on the property.

To be continued