Montgomery County Property Tax Disclosure

In an attempt to assure that home purchasers in Montgomery County understand how much they may be required to pay in real property taxes, the County Council has enacted new legislation. Effective April 1, 2008, “any written or electronically transmitted material that the Seller produces or distributes in connection with the advertisement for sale of a specific residential real property located in the County must disclose the estimated full-year tax that a Buyer would be obligated to pay in the next full tax year after the property is transferred….” The figure to be disclosed must include all State and County property taxes and any other non-tax fee or charge included in the consolidated tax bill. The estimate must be updated (1) each July 1 when the new annual tax bills are issued, (2) and by January 31 if the property is in the 3rd year of its 3-year assessment cycle to reflect the revised assessment by the State Department of Assessments and Taxation (“SDAT”). This law does NOT apply to the municipalities of Barnesville, Kensington, Poolesville or Rockville.

A little background may be helpful to understand the reason for this ordinance. Under Maryland law, properties are assessed for real estate tax purposes on a three year cycle. Any increased assessment is phased in over a three year period. In addition to this phase in, an owner occupant may be entitled to receive a Homestead Credit, which limits any increase in the tax bill over the prior year’s bill. For instance, the Homestead Assessment cap for Montgomery County is 10%. When a new owner-occupant acquires residential real property, however, the first full year tax bill that the new owner receives after acquisition is not limited by the Homestead credit. Thus, the new owner’s tax bill will be based on the phased-in assessed value for that tax year without the benefit of any cap on the amount of increase from the previous year’s assessment. This can sometimes result in a significant increase in the tax bill of the new owner. For subsequent tax years, the new owner-occupant does receive the Homestead credit (provided he has applied for it) and the increase in the taxable assessment will be capped. Based on this potential increase in the tax bill of the new owner, the County Council decided that sellers, in advertising the home, should advise prospective purchasers of the estimated property taxes which will be due for the first full year following the sale.

In order to comply with the law, the Seller (or Seller’s Agent) will need to determine the phase-in assessment of the property for the next tax year and then apply the current tax rate to that value. The Montgomery County Office of Consumer Protection, which is responsible for administering the law, has created a website for this purpose at the following address:

www.montgomerycountymd.gov/estimatedtax

This website allows anyone to log into the OCP website, input the address of the property and automatically receive the tax estimate required to be disclosed. This amount must then be disclosed as follows:

“Estimated property tax and non-tax charges in the first full fiscal year of ownership is $X.”

To assist its customers, MRIS has made three changes to all Montgomery County public records full displays and printouts: 1) MRIS has added a new label for the Assessment section, which states: “Tax Fiscal Year 2008 Estimated property tax and other non-tax charges in the first full fiscal year of ownership”; 2) The “Total Taxes” label has been replaced with “Total Est. Charges”; and 3) The “Assessed Value” label has been replaced with “Phase-in Value”. The new tax amounts will autofill for all NEW listings as of April 1, however you must edit the existing tax values in your active Montgomery County Listings. We would also strongly suggest that you double-check the dollar amounts in each listing to make sure it matches the amount shown on the online calculator.
This new law requires that the estimate be included in “any written or electronically transmitted material that a Seller produces or distributes in connection with the advertisement for sale of a specific residential real property…” [Emphasis added]. Originally, this term was not defined. That oversight has been corrected, however, reflecting a “common sense” approach as follows:

  1. Any “written or electronically transmitted material that a seller produces or distributes in connection with the advertisement for sale of a specific residential real property” as used in County Code §40-12C, includes:
    1. All printed sales material available on site or at an “open house”
    2. Any information about a specific property for sale which is available on the internet or in a web page, and
    3. Any written material specifying the amount of tax the seller currently pays or recently paid
  2. Any “written or electronically transmitted material that a seller produces or distributes in connection with the advertisement for sale of a specific residential real property” as used in County Code §40-12C, DOES NOT include, unless the material specifies the amount of tax the seller currently pays or recently paid:
    1. a newspaper or magazine classified “liner” advertisement or a “group display” advertisement in which the advertisement for a specific house is less than 16 square inches;
    2. one or more introductory screen listings for a specific property on the internet, which may contain the asking price, as long as the disclosure required by §40-12C appears on the internet listing in any later or linked screen which provides further financial details about the property;
    3. “for sale” signs posted at or near a property; or
    4. radio or television advertisement

Failure to comply with the law is a Class A violation under the County code which can be treated by the County as a civil or criminal matter involving fines and, theoretically, even incarceration. The ordinance does not clearly delineate who must comply with the law. It refers to materials that “… a Seller produces or distributes …” as being subject to the law. However, elsewhere in the bill it suggests that a “… Seller or the Seller’s agent is not liable for any incorrect information disclosed … if the Seller relies in good faith on a method approved or recommended by the County to estimate the information.” This language could be construed to suggest that both Sellers and their agents could be liable for failure to comply with the law.

The foregoing was prepared by the Law Firm of Darby, Nalls, Smyth & Muldoon, LLC, General Counsel to Counselors Title, LLC for general informational purposes. It is not intended as legal advice.