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Property Tax Obligations for Sellers: Clearing Balances Before Closing

18 Nov, 2024

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Property Tax Obligations for Sellers: Clearing Balances Before Closing

Introduction

Selling a property in Puerto Rico involves several financial and legal responsibilities, with property taxes being a crucial part of the process. As a seller, understanding your property tax obligations and clearing outstanding balances are essential steps to ensure a smooth and timely closing.

In this article, we provide a detailed overview of property tax obligations in Puerto Rico, explain how to check and clear outstanding balances, and guide you through the compliance steps required before transferring ownership to the buyer.


1. What Are Property Taxes in Puerto Rico?

Property taxes in Puerto Rico are governed by the Centro de Recaudación de Ingresos Municipales (CRIM), which oversees the assessment and collection of taxes on real estate. These taxes are used to fund municipal services such as schools, roads, and public safety.

How Property Taxes Are Calculated

Property taxes are based on the property’s appraised value as determined by CRIM, which often differs from the market value. The tax rate is typically 1.03% of the appraised value for residential properties, though rates can vary based on property type and location.

Who Is Responsible for Paying Property Taxes?

The owner of the property is responsible for paying property taxes. However, when selling a property, sellers must ensure that all taxes are current and no balances are outstanding before the closing date.


2. Why Is Clearing Property Tax Balances Important?

Failing to clear outstanding property taxes can delay the closing process, jeopardize the sale, or even lead to legal complications.

Consequences of Unpaid Property Taxes

  1. Closing Delays: Title companies will not proceed with the transfer of ownership if taxes remain unpaid.
  2. Legal Liens: Unpaid property taxes may result in a lien being placed on the property, which must be resolved before the sale.
  3. Increased Costs: Late payments may incur penalties and interest, increasing the amount owed.

3. Steps to Verify Property Tax Status

Before listing your property for sale, it’s important to verify its property tax status. Here’s how:

Step 1: Access CRIM Records

  • Visit the CRIM website or local office to request your property’s tax statement.
  • Verify the property’s registration, appraised value, and tax history.

Step 2: Check for Outstanding Balances

  • Confirm if there are unpaid taxes or discrepancies in your account.
  • Look for any additional fees, such as penalties for late payments.

Step 3: Resolve Discrepancies

  • If there are errors in the property’s registration or appraised value, work with CRIM to correct these issues.
  • Ensure that payments have been properly credited to your account.

4. How to Clear Outstanding Property Taxes

Paying Property Taxes

  1. Online Payments: Use CRIM’s online platform to make payments.
  2. In-Person Payments: Visit a CRIM office or authorized payment center.
  3. Installment Plans: If you cannot pay the full balance, inquire about payment plans offered by CRIM.

Requesting a Property Tax Clearance Certificate

  • Also known as a “Certificación de Cancelación de Deuda Contributiva,” this document verifies that all property taxes have been paid.
  • Apply for the certificate early, as processing times can vary.

Dealing with Liens

If a lien has been placed on your property due to unpaid taxes:

  • Pay the outstanding balance to CRIM.
  • Request a lien release document to remove the encumbrance.

5. Common Property Tax Issues for Sellers

Unregistered Properties

Some properties in Puerto Rico may not be properly registered with CRIM, resulting in tax inconsistencies.

Incorrect Appraised Values

If the appraised value is outdated or incorrect, it can lead to inaccurate tax calculations.

Unpaid Special Assessments

In addition to annual property taxes, special assessments for municipal improvements (e.g., road repairs) may apply.

Inherited Properties

For inherited properties, sellers must ensure that ownership is correctly transferred and that all taxes are current before the sale.


6. Preparing for Closing: Tax Documentation Checklist

To ensure a smooth closing process, gather the following tax-related documents:

  • Property Tax Clearance Certificate: Proof that all taxes are paid.
  • Payment Receipts: Documentation of recent tax payments.
  • CRIM Property Registration: Ensure the property is correctly registered.
  • Lien Release (if applicable): If there were liens, provide proof of resolution.

7. Navigating CRIM’s Processes

Working with CRIM can sometimes be time-consuming, especially if there are discrepancies or unpaid taxes. Consider the following tips:

Start Early

Begin the process of verifying and clearing taxes as soon as you decide to sell.

Hire a Professional

A real estate agent or attorney with experience in Puerto Rico can help navigate CRIM’s processes and ensure all requirements are met.

Keep Records

Maintain copies of all correspondence and payments to avoid disputes.


8. How a Real Estate Agent Can Help

Real estate agents play a vital role in ensuring tax compliance for sellers. They can:

  • Assist in obtaining CRIM documents and clearance certificates.
  • Identify potential tax issues early in the process.
  • Recommend professionals for resolving complex tax matters.

9. Finalizing Property Tax Obligations on Closing Day

On the closing day, sellers must provide the buyer’s legal team with proof that all property taxes have been paid. This includes:

  • Property Tax Clearance Certificate.
  • Confirmation of payment for any special assessments.

Resolving Last-Minute Issues

If issues arise on closing day, work with your agent or attorney to address them promptly.


10. Conclusion

Understanding and fulfilling your property tax obligations is a critical step in selling real estate in Puerto Rico. By verifying tax status, clearing balances, and preparing the necessary documents, sellers can avoid delays and ensure a smooth closing process.

For expert assistance and personalized guidance, contact Puerto Rico Real Estate, PSC at 787.244.6364 or [email protected]. Our team is here to help you navigate every aspect of the real estate selling process.

Call to Action

Ready to sell your property? Let Puerto Rico Real Estate, PSC, handle the details. Contact us today for professional support and peace of mind!

 

 

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