By PETER ROSENTHAL, President
V.I.P. Trust Deed Company
March 2000
Are you delinquent with county property taxes? If so, read on, but sit down and take your heart medicine. If you’re not delinquent on your real estate taxes read on anyway, as you may be able to save a friend or relative hundreds of dollars in interest.
Though I had intended to research exact dates and interest changes prior to writing this column I, frankly, have been much too busy of late. The exact dates should do little to change the thrust of the column.
In the old days, delinquent property taxes carried an interest rate of 6%. I’m getting old enough now so that I can use “in the old days” a lot. As market interest rates rose above 6%, people started taking advantage of the county by PURPOSELY not paying their taxes, i.e. cheap loan. Not wanting to be taken advantage of, the county raised their penalty interest to 10%, which solved the problem – for a while. In the early 1980s there was a significant run up of market interest rates and the county again needed to raise the penalty interest rates to “keep up” with the market. Delinquent tax interest was then jumped to 18%. That’s right, I said EIGHTEEN percent! If you tried loaning money to somebody at 18%, you would be civilly liable for usury unless you were, by statute, an exempt lender. In fact, if you, as a private party, had a pattern and practice of loaning money at 18% you could face CRIMINAL prosecution unless the loan was arranged by an exempt lender.
If I were sitting on the county’s side of the desk I would counter by saying it’s not a loan, it’s a penalty. I would further contend that it’s customary for businesses to charge 1 ½% per month (18% per annum) on delinquent bills. Well, don’t get too teary-eyed worrying about the county, this interest rate really effects people’s everyday lives and in many cases forces the loss of their property.
This problem was greatly exacerbated when property values dropped sharply in the early 1990s. People found themselves out of work and owing property taxes based on values of their home or investment property that was significantly higher than the REAL value. I know of many, many cases in the Lancaster/Palmdale area with land ownership where values dropped 60% to 80%. People were unable to sell their property or pay their taxes and the county started the 18% snowball rolling. Yes, it was up to the owners to appeal the change in value, but most property owners are no match for the rigorous appeal process.
Now lets bring this story up to date. This is no longer the 1970s or the 1980s. This is the 1990s. For the last several years interest rates on conventional home loans have been at or below rates charged 30 years ago. I know because I purchased my first California house in 1973 and my present house in 1975. If you have been following this tale of woe, you might have expected the county to GREATLY REDUCE the 18% penalty interest rate as market interest rates fell. No such luck. During those years our county was faced with budget shortfalls and a reduction in the 18% interest charge would have meant less money for the general fund.
Several years ago I devoted another column to this subject. County Supervisor Michael Antonovich happened to read that article and he is aware of my concern. Too many people have lost their homes because of this horrible 18% snowball that rolls merrily down hill while homeowners and property owners get deeper and deeper behind the eight ball.
I’m not naïve enough to believe that my occasional article will awaken a ground swell of protest. I’m merely devoting my topic this week to a serious burden placed on many property owners. People behind in their taxes know they are behind but have NO IDEA how quickly that snowball is turning into an avalanche and, if left unchecked, will bury them. Since I’m using this metaphor, let me further state that if you were caught in a real avalanche the county (Search and Rescue) would expend countless man-hours and hundreds of thousands of dollars trying to rescue you. At the very least, they would recover your body. Unfortunately, in this case the county may be contributing to your early demise or homelessness.
Peter Rosenthal
VIP Trust Deed Company