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Are you delinquent with county
property taxes? If so, read on, but sit down and
take your heart medicine. If you’re not delinquent
on your real estate taxes read on anyway, as you may
be able to save a friend or relative hundreds of
dollars in interest.
Though I had intended to
research exact dates and interest changes prior to
writing this column I, frankly, have been much too
busy of late. The exact dates should do little to
change the thrust of the column.
In the old days, delinquent
property taxes carried an interest rate of 6%. I’m
getting old enough now so that I can use “in the old
days” a lot. As market interest rates rose above
6%, people started taking advantage of the county by
PURPOSELY not paying their taxes, i.e. cheap loan.
Not wanting to be taken advantage of, the county
raised their penalty interest to 10%, which solved
the problem – for a while. In the early 1980s there
was a significant run up of market interest rates
and the county again needed to raise the penalty
interest rates to “keep up” with the market.
Delinquent tax interest was then jumped to 18%.
That’s right, I said EIGHTEEN percent! If you tried
loaning money to somebody at 18%, you would be
civilly liable for usury unless you were, by
statute, an exempt lender. In fact, if you, as a
private party, had a pattern and practice of loaning
money at 18% you could face CRIMINAL prosecution
unless the loan was arranged by an exempt lender.
If I were sitting on the
county’s side of the desk I would counter by saying
it’s not a loan, it’s a penalty. I would further
contend that it’s customary for businesses to charge
1 ½% per month (18% per annum) on delinquent bills.
Well, don’t get too teary-eyed worrying about the
county, this interest rate really effects people’s
everyday lives and in many cases forces the loss of
their property.
This problem was greatly
exacerbated when property values dropped sharply in
the early 1990s. People found themselves out of
work and owing property taxes based on values of
their home or investment property that was
significantly higher than the REAL value. I know of
many, many cases in the Lancaster/Palmdale area |
with land ownership where
values dropped 60% to 80%. People were unable to
sell their property or pay their taxes and the
county started the 18% snowball rolling. Yes, it
was up to the owners to appeal the change in value,
but most property owners are no match for the
rigorous appeal process.
Now lets bring this story up to
date. This is no longer the 1970s or the 1980s.
This is the 1990s. For the last several years
interest rates on conventional home loans have been
at or below rates charged 30 years ago. I know
because I purchased my first California house in
1973 and my present house in 1975. If you have been
following this tale of woe, you might have expected
the county to GREATLY REDUCE the 18% penalty
interest rate as market interest rates fell. No
such luck. During those years our county was faced
with budget shortfalls and a reduction in the 18%
interest charge would have meant less money for the
general fund.
Several years ago I devoted
another column to this subject. County Supervisor
Michael Antonovich happened to read that article
and he is aware of my concern. Too many people have
lost their homes because of this horrible 18%
snowball that rolls merrily down hill while
homeowners and property owners get deeper and deeper
behind the eight ball.
I’m not naïve enough to believe
that my occasional article will awaken a ground
swell of protest. I’m merely devoting my topic this
week to a serious burden placed on many property
owners. People behind in their taxes know they are
behind but have NO IDEA how quickly that snowball is
turning into an avalanche and, if left unchecked,
will bury them. Since I’m using this metaphor, let
me further state that if you were caught in a real
avalanche the county (Search and Rescue) would
expend countless man-hours and hundreds of thousands
of dollars trying to rescue you. At the very least,
they would recover your body. Unfortunately, in
this case the county may be contributing to your
early demise or homelessness.
Peter Rosenthal
VIP Trust Deed Company |