Title company may be liable for undisclosed property tax


August 08, 2004

Dear Mr. Azrael:

My husband and I purchased a home in November 2002 in Baltimore City. The previous owners were given a real property tax exemption because one of them was blind.

We were not informed of this exemption at settlement and received a bill from Baltimore City for additional real estate taxes. The city tax office informed me that the exemption was listed on the lien sheet and that someone should have looked into the exemption.

Do my husband and I have any legal recourse? We paid for title insurance.

Dear Reader:

Under state law, persons with a visual acuity of 20/200 or less in the better eye may receive, with a doctor's certificate, an exemption of $15,000 of the tax assessment on their house and surrounding yard.

The exemption applies to a surviving spouse of an eligible person. Since tax rates vary among Baltimore City and Maryland counties, the value of the exemption for $15,000 of tax assessment also varies. Based on current tax rates, the exemption in the city works out to a savings of about $370 on annual real estate taxes.

Real estate taxes are assessed from July 1 through June 30 and are payable in advance in either a lump sum or in semi-annual installments.

When the property was sold to you in November 2002, the exemption no longer applied. Additional real estate taxes should have been collected from you at settlement for the period between the date of settlement and the date the next annual or semi-annual tax payment was due.

The title company conducting closing usually would include these additional taxes as a buyers' charge on the settlement statement, and would pay the taxes when your deed was recorded. In your case, it appears that the additional real estate taxes were not collected from you at settlement, and you subsequently were billed by the city for the extra amount.

It is unclear whether you actually suffered any loss because the additional taxes were your responsibility, whether they were collected at settlement or billed to you later.

Nevertheless, I suggest you send the bill for extra taxes to the title insurance company that issued your policy. Ask them to review the terms of your specific title policy to determine if it guarantees that no additional real property taxes were due for the period in question.

If your policy guarantees, for example, that the real estate taxes were paid through Dec. 31, 2002, or June 30, 2003, and there are no applicable exceptions in the policy, the title insurer may have to reimburse you for all or part of the additional tax bill.

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