When no one in the family wants to pay property taxes, what can you do? Even if the family has created a S-Corporation, you’ll still need some savvy tricks to save the property.
Q: I am from the Island of Maui in the state of Hawaii. I am the President of my families S-corp and the corporation has a property that has a house on it but is not considered livable.
A home was built by a tenant on the land. The tenant had a 50 year lease. Now the lease ended and the home belongs to our corporation. When the lease was up and the property was turned over to us, we didn’t receive any tax bills from the County of Maui until last month. We received a final notice of unpaid taxes and explaining terms about delinquent payments and the force of foreclosure if the said amount weren’t paid in full by two weeks.
I called the department of tax and had a lengthy discussion with them. The director of tax had me write a letter regarding our situation and agreed to write up an installment plan for 5 months. That is all fine and I understand that we are at fault for not following up on taxes regardless that we didn’t receive any notices until now.
Here’s my issue: The S-corp is made up of family members that has total of 30 plus shareholders. The corporation is “land rich” but has no income nor does it have any monies to pay land taxes. All taxes are being paid by shareholders, at least the ones who can pay or want to pay.
At least half of the shareholders live very basic lives and have minimal household income and collect subsistence from the state. The rest of the other shareholders just won’t pay anything because they claim that they don’t have an obligation to pay. If we don’t get these back taxes paid within a the deadline, the county of Maui will proceed with foreclosure.
I am one person out of two whom could actually pay these back taxes and stop the foreclosure, but our issue is the ongoing obligation to pay the tax bills. If we are going to be stuck paying it, I would want to have ownership of the property. I just don’t know how to go about getting everyone to sign off on it. I really would hate to lose the property because of not paying the taxes. I’ll take any advice you can share. Thank you.
A: Thanks for your question. Your question falls into that group of questions that deal with people that own real estate together and don’t get along. In your situation, you have a large group of people that own a corporation that then owns the land.
(You mentioned that the corporation is an “S” corporation vs a “C” corporation. With an S corporation, the shareholders see the tax benefits and losses on their personal income tax returns. With a C corporation, the shareholders receive dividends on distributions but can lose their investment and don’t see the benefits of profits or losses that are at the corporate level flow to their personal income tax returns.)
The issue is not how you hold title to the property but what governs the relationship between the owners of the home, the land, the building or whatever real estate is owned by those people or that company. You’ll need to see what the corporate charter or shareholder agreement has to say. As a corporation, some shareholders may have certain rights if they put more money into the corporation and dilute the ownership interest of other shareholders.
We don’t typically deal with corporate issues in this column, but as we have talked about when we have family members own property together, you need to figure out how to pay those taxes to keep the land and then figure out how you get repaid for the money you have put into the corporation. Either the money you put in is a loan to the corporation that will have to get repaid at some future date when the corporation has income or when the property is sold. Or, as we mentioned, your contributions to the corporation could increase your ownership in the corporation and reduce the ownership interest of others in the corporation.
You should talk to a corporate attorney to review your corporation documents and determine what your options might be, how you’d need to handle the infusion of cash to the corporation and what actions the corporation must take to make sure the structure is solid and other owners can’t object to how the money was put in and how the money will get repaid.
But we agree with one thing: It would be unfortunate to lose an 8-acre parcel on Maui simply because no one wanted to pay the taxes.
My brother died while my mom was in the nursing home.He had put her house in his name in2008 with no payment ,no gift tax or quit claim deed.Now she can’t do anything about the deed not being made like he said it was.She is blind.So she didn’t know the other kids names were not on it ,no life time estate,or a phrase that if one of us proceeded the other in death the other take over.Now he waited exactly a few months over 5 years and locked me out of the house that I had been her and Daddy caretaker for years and left mama in nursing home so she couldn’t go back to home or so I couldn’t take her back home..Is she at a loss for the 5 year rule to get her house back..We also had to pay for 3 years of taxes to keep it off auction at court house..My brother son sold it and now we are getting evicted and I need to know what to do other than hire lawyer.I am fighting for her in court and am gathering evidence but I don’t know if she has a chance to get it back and come home.
My son was told he could live in the house these people’s mother owned and has since passed away. My son has been in this house 3 years. The house is not in the best of condition but he’s done repairs as he can afford. The kids do not want the house at all but taxes are due. Can we pay the taxes and take ownership of the house?
You can’t just pay the taxes and own the property. The current owners, which would be the mother’s children, presumably inherited the property and have given your son the right to live there. He should not make any additional repairs to the property until he is either given the home (via a quit claim deed or some other deed that transfers ownership to him) or he buys the property. If the agreement is that instead of paying rent your son will fix up the property and pay the property taxes, then he should do that. But if the agreement isn’t in writing, it’s not worth much. So, he needs to get it in writing.
A real estate attorney could help here. It would be good to have the title transferred officially to your son – and I hope that happens.
Hello Ms. Glink,
I, have a Texas Property Tax and Property issues. I, live in Texas. It’s my Parents Property both (deceased). They didn’t leave a Will. There’s 5 children involved 6 including myself. There a 2 deceased (my brother and sister). The problem at hand (currently) is that I’ve (Regina) have being paying (past due Property Taxes) on this Property and also had the home a (Condemned Structure) Demo, for safety and health reasons.
I, want to (KEEP THIS PROPERTY). My question is how do I get the other 3 living siblings to sign over the interest in this Property. I, don’t want to sell it. Please advise. Any input would be helpful. Enjoy your day.