Our office has had two situations in the last six months where an association failed to pay property taxes on association common area, the tax department foreclosed, and a third-party bought the common area at the tax foreclosure sale. Fortunately in these cases it was not the association pool or clubhouse, but it could have been.
For North Carolina associations – There is a statue in North Carolina that allows associations to apply for a tax exempt status for common area. Once approved the association does not owe property taxes on that common area going forward. The key is to make sure that the proper one-time application for tax exemption has been submitted and approved for each parcel of common area. Typically this is done by the board of directors very shortly after the common area is deeded to the association. When this important step is overlooked the association could be responsible for a significant amount of property taxes that, if not paid, could result in loss of that common area at a tax foreclosure sale.
How do we make sure this doesn’t happen for North Carolina associations? It is advisable to
- confirm that the necessary exemption application has been submitted and approved for all the common area of the association,
- immediately submit applications if not already submitted,
- confirm that the association’s registered agent is correct since this one way the association may be notified of a tax delinquency, and
- confirm the County tax department has the correct address for the association or its management company.
For South Carolina associations – There is no property tax exemption for common area in South Carolina. There will be a tax bill every year that must be paid to avoid a tax lien, tax foreclosure, and possible sale of the common area.
How to make sure this does not happen for South Carolina associations? It is advisable to
- confirm that the association’s registered agent is correct,
- confirm the County tax department has the correct address for the association or its management company, and
- calendar an annual review of each association to confirm tax bills have been paid.
The attorneys at Law Firm Carolinas are available and glad to discuss these or other legal issues facing associations.
Author: Steven E. Black
Articles have been Reprinted with permission from Black, Slaughter, Black.
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