Also known as: real estate tax · real-estate taxes · real-estate tax · property taxes
Written by attorneys — see sources below.
A governmental levy imposed on the ownership or assessed value of real property and payable by the owner to the taxing authority. Payment prevents the attachment of a superior lien and satisfies the possessor's duty to avoid waste of the collateral.
Ralph Richardson holds the junior mortgage on an office building whose mortgagor has defaulted. He obtains appointment of a receiver who collects $80,000 in rents. The receiver first pays the accrued real estate taxes and reasonable maintenance costs before applying the remainder to the junior obligation.
Rachel Ramirez owns mortgaged commercial property. Without the mortgagee's consent she allows county real estate taxes to become delinquent, causing a superior lien to attach. The mortgagee treats the delinquency as waste and accelerates the loan.
Ronald Reed's religious organization owns a building used solely for worship. The local assessor denies a real estate tax exemption. The organization sues, arguing the denial violates the First Amendment under the standard applied to property-tax exemptions for religious uses.
Frederick Walz, owner of real estate in Richmond County, New York, filed suit in New York state courts seeking an injunction to prevent the New York City Tax Commission from granting property tax exemptions to religious organizations for properties used solely for religious worship. The exemptions were authorized by Article 16, Section 1 of the New York Constitution, which permits exemptions for real or personal property used exclusively for religious, educational, or charitable purposes and owned by nonprofit corporations or associations organized exclusively for such purposes. Walz contended that the exemptions indirectly required him to contribute to religious bodies by increasing the tax burden on non-exempt property. The New York City Tax Commission moved for summary judgment. The trial court granted the motion. The Appellate Division of the New York Supreme Court affirmed, and the New York Court of Appeals also affirmed. The United States Supreme Court noted probable jurisdiction and heard oral argument on November 19, 1969. All fifty states provide tax exemptions for places of worship, most through constitutional provisions. New York has granted such exemptions since before the adoption of the First Amendment, and Congress has provided similar exemptions for church property in the District of Columbia since the early nineteenth century. The exemptions apply to a broad class of nonprofit organizations, including hospitals, libraries, scientific groups, and patriotic societies, not solely to religious organizations.
View caseRyan Roberts owns a mobile-home park. The city imposes a real estate tax on the underlying land that increases the rent the park can charge. Roberts challenges the tax as an unconstitutional taking of his property interest in the park.
John K. Yee and Irene Yee own the Friendly Hills and Sunset Terrace Mobile Home Parks in Escondido, California. In 1988 the voters of Escondido approved Proposition K, a rent control ordinance that reset rents to 1986 levels and barred increases without city council approval after consideration of eleven enumerated factors such as the Consumer Price Index, comparable pad rents, capital improvements, property taxes, and operating expenses. A few months after the ordinance took effect the Yees filed suit in San Diego County Superior Court, alleging that the ordinance deprived them of all use and occupancy of their property and granted tenants and their successors the right to occupy it permanently; they sought six million dollars in damages, a declaratory judgment, and an injunction. The complaint was filed against the background of California's Mobilehome Residency Law, enacted in 1978, which restricts the grounds on which a park owner may terminate a tenancy, prohibits requiring removal of a mobile home upon sale, bars transfer fees, and prevents disapproval of a purchaser who can pay the rent. Eleven other park owners filed identical suits against the city; by stipulation the twelve cases were consolidated for appeal and submitted on the briefs and argument in the Yee case alone. The Superior Court sustained the city's demurrer and dismissed all complaints. The California Court of Appeal affirmed the dismissals. The California Supreme Court denied review. Eight of the park owners, including the Yees, petitioned for certiorari, which the United States Supreme Court granted in 1991 to address a conflict between the decision below and holdings of the Third and Ninth Circuits in similar mobile-home rent-control cases. The Yees' complaint and opposition to the demurrer relied on the Ninth Circuit's decision in Hall v. Santa Barbara. They asserted that the combined state and local measures transferred to tenants the right to occupy pads indefinitely at below-market rents while preventing park owners from selecting incoming tenants or changing the use of their land without extended notice.
View caseRosa Ruiz seeks a building permit for waterfront property. The district conditions approval on payment of a sum earmarked for off-site drainage improvements that will reduce future real estate tax burdens on neighboring parcels. Ruiz claims the condition constitutes an unconstitutional exaction.
In 1972, Coy A. Koontz, Sr. purchased an undeveloped 14.9-acre tract of land on the south side of Florida State Road 50 east of Orlando that lies entirely within the jurisdiction of the St. Johns River Water Management District. The property contains wetlands as defined by Florida statute. A drainage ditch runs along the property's western edge, and high-voltage power lines bisect it into northern and southern sections. The northern 3.7-acre section drains well despite its classification. The southern section includes a small creek, forested uplands, and wetlands that sometimes have water as much as a foot deep. In 1984 the District adopted a rule requiring permit applicants whose projects would adversely impact wetlands to offset that loss by creating, enhancing, or preserving wetlands elsewhere. That requirement could be satisfied by purchasing credits from a mitigation bank. In 1994 Koontz applied to the District for Management and Storage of Surface Water and Wetlands Resource Management permits to develop the northern 3.7 acres. He proposed to raise the elevation of the building site, install a dry-bed pond, and grant a conservation easement over the remaining 11 acres. The District found the mitigation inadequate. It stated it would approve the permits only if Koontz reduced the development to one acre and deeded the remaining 13.9 acres to the District. In the alternative, Koontz could pay contractors to replace culverts or fill ditches on District-owned land several miles away to enhance approximately 50 acres of wetlands. Koontz found both alternatives unacceptable and filed suit in Florida circuit court under Fla. Stat. § 373.617(2) alleging that the demands constituted an unreasonable exercise of the state's police power. After a two-day bench trial at which experts testified that the northern section had already been seriously degraded by surrounding construction, the trial court found the demands lacked the required nexus and rough proportionality and awarded damages. The Florida District Court of Appeal affirmed, but the Florida Supreme Court reversed on the grounds that the permit denial was not a taking and that the District had not actually demanded any property from Koontz. The United States Supreme Court granted certiorari to resolve a conflict among state courts of last resort on whether the Nollan and Dolan standards apply to a land-use agency's demand for money.
View caseRiley Rivera owns an apartment building subject to rent control. The ordinance permits pass-through of increased real estate taxes to tenants. Rivera raises rents accordingly and defends the increase against a tenant challenge that the pass-through violates due process.
In 1979 the city of San Jose enacted its rent control ordinance with the stated purpose of alleviating some of the more immediate needs created by San Jose's housing situation. These needs include the prevention of excessive and unreasonable rent increases, the alleviation of undue hardships upon individual tenants, and the assurance to landlords of a fair and reasonable return on the value of their property. At the heart of the ordinance is a mechanism allowing a landlord an automatic rent increase of as much as eight percent. If a tenant objects to a greater increase, a Mediation Hearing Officer must determine whether the proposed increase is reasonable under the circumstances after considering several factors, one of which is hardship to the tenant. The ordinance provides that if the hearing officer determines that the proposed increase constitutes an unreasonably severe financial or economic hardship on a tenant, he may order that the excess of the increase be disallowed. Any tenant whose household income and monthly housing expense meets the specified income requirements shall be deemed to be suffering under financial and economic hardship which must be weighed in the Hearing Officer's determination. Richard Pennell, an owner and lessor of 109 rental units in San Jose, and the Tri-County Apartment House Owners Association, an unincorporated association organized for the purpose of representing the interests of owners and lessors of real property located in San Jose, sued in the Superior Court of Santa Clara County seeking a declaration that the tenant hardship provisions are facially unconstitutional and therefore illegal and void. The Superior Court entered judgment on the pleadings in favor of appellants. The California Court of Appeal affirmed that judgment, but the Supreme Court of California reversed. Appellants alleged in their complaint that the real property they own is subject to the terms of the ordinance. At oral argument they stated that the Association represents most of the residential unit owners in the city and has many hardship tenants. Appellees contended that appellants lacked standing because they had not alleged that any member has hardship tenants who might trigger the hearing process. They also contended that appellants had not shown they have been or will be aggrieved by a hearing officer's determination reducing a rent increase on the ground of tenant hardship. The case reached the United States Supreme Court on appeal from the judgment of the Supreme Court of California. The Court postponed consideration of the question of jurisdiction and, after hearing oral argument, addressed the merits of the appeal.
View caseA junior receiver must first apply rents to the payment of real estate taxes and other reasonable maintenance expenses before applying any excess to the junior obligation. This duty arises because the receiver, like any possessor, must avoid waste.
Supporting sources
Yes. Waste includes the mortgagor's failure to pay property taxes or governmental assessments before delinquency when the lien has priority over the mortgage. The mortgagee may then pursue remedies for impairment of security.
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The junior receiver may collect rents before a senior receiver is appointed but must apply them first to real estate taxes. Only the excess may be applied to the junior debt, preserving the collateral for all lienholders.
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…U. S. C. § 501(c)(3); the corporate income tax in many States, see, e. g., Cal. Rev. & Tax. Code Ann. § 23701d (West 1992); and property taxes in all 50 States, see Turner, Property Tax Exemptions for Nonprofits, 12 Probate & Property 25 (Sept./Oct. 1998); and clergy qualify for a federal tax break on income used for housing…