What happens when you don’t pay your property taxes and then sell your home?

When I checked my mail a couple of weeks ago, I was met with an unwanted surprise…my property tax bills. 

The bills reminded me of a prominent senator from Massachusetts who was in hot water several years ago for docking his yacht in a neighboring state that did not have sales or excise tax regarding the yacht. The claim was that this was intentionally done to avoid taxes required in his home state. The senator did end up paying the taxes to his home state that would have been due if the boat was docked in the state. 

I’m sure everyone knows it is important to pay taxes due on personal property such as yachts, boats, RVs, ATVs and even some storage buildings. However, few are aware that in North Carolina unpaid personal property taxes can have implications on any real property when you are selling your home.  

Let’s review, in part, N.C. General Statute § 105-355. “Creation of tax lien; date as of which lien attaches.”:  

(a)    Lien on Real Property — "…and the lien for taxes levied on personal property shall attach to all real property of the taxpayer in the taxing unit on the same date." 

Taxes on Motor Vehicles are treated differently. The taxes due on a Motor Vehicle only attach to that Motor Vehicle and are collected each time you renew your registration. They do not attach to real property.

This all is important to remember if you are selling your real property because this lien must be paid before you can convey the property free and clear of liens. The amount you may have thought you would clear from the sale of your real property will be reduced, and in some cases, you may actually need to bring money in to sell your real property. 

For buyers this is equally important because if the personal property taxes are not paid at closing, the buyer will take the property subject to the personal property tax lien. 

This underscores the importance of having an experienced attorney examine the title to any real property that you are purchasing.

Published on November 23, 2015