Are You Liable for Property Taxes on Property You Don’t Own?

Updated on May 25, 2021

Can you personally be held liable for property taxes on a property that you used to, but no longer own?

A property tax is a tax levied by reason of ownership or possession of property. It is ordinarily assessed on all property or on all property of a certain class located within a certain territory in proportion to its value.

The obligation to pay the tax is generally absolute and unavoidable and not based on any voluntary action of the person assessed.  However, can a person be personally liable for property taxes assessed on property that person no longer owns? As discussed below, generally speaking, a person cannot legally be assessed for property to which the person has no title and in which the person has no interest.

In California, the Revenue and Taxation Code governs property taxes. As used therein, the term “real estate” or “real property” includes possession of, claim to, ownership or, or right to possession of all land; all mines, minerals, and quarries in the land, all standing timber whether or not belonging to the owner of the land, and all rights and privileges pertaining thereto; and improvements.

Ownership is the usual basis for taxation, and the duty to pay taxes primarily rests on the person who holds legal title. Where security, title and ownership are in different parties, the one who is subject to the tax is determined by contract. In other words, the duty to pay the tax rests on the beneficial or equitable owner. The right to obtain an economic benefit from the use and possession of property may be a relevant consideration in determining who is actually is the owner for tax purposes in doubtful cases. However, the existence of that right is not controlling.

Nonetheless, except in limited circumstances, a taxpayer is not personally liable for ad valorem taxes, i.e. tax based on assessed value of an item, because the taxing agency’s recourse is a lien on the assessed property enforceable by a sale of the property. Therefore, generally speaking, a person cannot legally be assessed for property to which the person has no title and in which the person has no interest.

This blog, does not address the exceptions to the rule, such a triple net leases or long term leases where the tenant may agree to be responsible for property taxes as a part of their lease.

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