Legaslative update – NM Property taxes


Proposed Senate Bill 117 has been introduced (see attached) as a possible solution for property tax lightning.

The following represent my thoughts about this bill:

Currently this part of the state statues reads as follows:
Whenever a deed or real estate contract transferring an interest in real property is received by a county clerk for recording, a copy of the deed or real estate contract shall be
given to the county assessor by the clerk.
A county clerk who willfully fails to comply with this section is guilty of a petty misdemeanor, punishable in accordance with the Criminal Code.

This was later updated for residential properties in 2004 (see bottom of this email for the gist of that change)

Although I would support a disclosure bill for all real estate in NM, this bill doesn’t do that, AND it creates less transparency that we currently have.

It also has a number of issues:

1. It conflicts with the current law for residential disclosure, which in itself has had a number of historical problems and issues (from the assessors and the property owners perspectives). A new bill should address those issues.

2. Limited use bill – for those that thought this bill might create a fairer system of values, it won’t, because it limits the assessors use to creating an summary index of value. My assumption is that the bills author hopes to use this to force the assessors to hit the “reset” button on all values by showing that their total portfolio is less than 85% of market value. That isn’t a bad idea, but it will lead to all values being increased. (removing the 3% cap on residential).

3. Most assessors lack resources (i.e. computer/GIS system) to comply with this bill. That in itself is a whole ‘nother box of pandoras as Former Govenor King would say.

4. Creates information that is not public information (what is the point of transparency if we allow the government to hide information) – this is a major problem as we have cases where the assessors has used an affidavit to support values in a formal hearing, but redacted the relevant information (because its not public), thus denying the property owner their right to correct bad information and the formal board has allowed the evidence to be used to force a higher value. Although I am sure it would never happen, a “lazy” appraiser could create an affidavit that has their target value, redacting everything else and the property owner would be defenseless to challenge that comparable sale.

5. The value language is a problem – I have a large 2012 apartment sale, where an escrow has been set aside for increased property taxes (same owner had the property for 25 years) – the language would require that escrow to be included in the calculation of value, even though it didn’t add value at all, but was rather a self financed insurance policy.

6. If we disclose price, we should also disclose size as that is relevant to value. And Zoning. and Use and Tenant info. and Financing. it takes the entire bundle to create value.

7. The bill lacks teeth for enforcement – what happens if we don’t file the affidavit? current law makes it a misdemeanor and $1,000 fine for each party (seller, buyer, title company). This net will capture the small property owner, but miss the larger institutional owners (as it does now).

8. It lacks verification – the bill should require that the affidavit be notarized as I’ve had several cases where a value affidavit has been presented, and no one has knowledge as to who actually signed it.

9. It creates unnecessary red tape and bureaucracy – what if the parties can’t agree on how to fill it out? Whose obligation is it really?

10. It requires the buyer and seller to agree on the allocation between real and personal property. This might seem like a small issue, but I’ve had buyers and sellers argue over whether 200 refrigerators are part of the real or seperate personal property. Currently, the system allows each party to make its own allocation.

11. Ultimately, what is the goal for this bill? I think if we knew that, we might know how to support them (or not).

Finally, if we decide to support it, I would recommend removing the emergency portion of the language. I have too many multifamily and commercial clients that could be impacted by this and they need to be able to plan for it in 2014, not be surprised as notice of values are being sent out in 2013. Along those lines, I’ve attached our latest survey of county by county and when notices of value are going out so we can see the impact it would have right now.

One more thought – I would run this by the title companies, to see if they would be willing to record deeds based on this (it increases their liability).

I’ve finally come around that transparency is key to a fairer property tax system, and if others are on the same band wagon, we would be better suited to draft our own bill and make sure it prohibits transfer taxes (NM had disclosure until 1970 and it was removed as part of the constitution rewrite to eliminate transfer taxes).

Thats all for today,
Todd Clarke CCIM

After January 1, 2004, New Mexico’s status as a “non-disclosure state” as relates to property sales data changed. Beginning in 2004 any person “presenting a deed, real estate contract,…” for recording with the county clerk is required to also file with the county assessor within thirty days of filing with the county clerk, an affidavit relating to the transfer. It is required that the affidavit contain the following information:
1. The names of the transferors and transferees
2. The current mailing address of both
3. The legal description of the parcel
4. The full consideration paid for the parcel
5. The value and a description of any personal property contained in the sale.
The law states that the assessor shall “…index the affidavits in a manner that permits cross-referencing to other records in the assessor’s office pertaining to the specific property” and “The affidavit and its contents are not part of the valuation record of the assessor”. This indicates, and some county assessors have stated, that the affidavit should not be used to increase the value of the subject property. The correct use of the affidavit then is as verified comparable sales data.

There are a number of exceptions to the requirement to provide the affidavit. In general these are for transfers that don’t represent what we think of as an actual, market conveyance of property. These exceptions include:
1. A deed that results from payment of a real estate contract
2. A lease or easement
3. A deed wherein the grantor is a government entity
4. A quitclaim deed to clear boundary disputes
5. A conveyance executed pursuant to a court order
6. A deed for am unpatented mining claims
7. An instrument solely to provide or release security for a debt
8. An instrument that confirms or corrects a previously recorded deed
9. An instrument between husband and wife or parent and child with only nominal consideration.
10. An instrument arising out of a tax sale

There are several others exceptions along these lines, including the conveyance of a property to a trust with the same ownership. A person who fails to file the affidavit in the required time frame, or who provides false information, is guilty of a misdemeanor and can be fined up to $1,000. As well, any employee, or former employee of the assessor who willfully releases this information is guilty of a misdemeanor and can be fined up to $1,000 per occurrence. An exemption is make for release of data as part of the formal protest process.

What is Residential?
Per the tax code, “residential property” means property consisting of one or more dwellings together with appurtenant structures, the land underlying both the dwellings and the appurtenant structures and a quantity of land reasonably necessary for parking and other uses that facilitate the use of the dwellings and appurtenant structures; as used in this subsection, “dwellings” includes both manufactured homes and other structures when used primarily for permanent human habitation, but the term does not include structures when used primarily for temporary or transient human habitation such as hotels, motels and similar structures;

That is clear for a single-family but what about a 20 unit apartment complex? What about a 200 unit complex?

THANKS TO NAIOP for getting the word out about this bill.