BILL ANALYSIS Ó
SENATE GOVERNANCE & FINANCE COMMITTEE
Senator Lois Wolk, Chair
BILL NO: AB 261 HEARING: 6/29/11
AUTHOR: Dickinson FISCAL: Yes
VERSION: 5/11/11 TAX LEVY: No
CONSULTANT: Grinnell
PROPERTY TAX: TAX DEFAULTED PROPERTY
First ask the board of supervisors to rescind a tax sale
before challenging it in court.
Background and Existing Law
I. Tax Sales. When a taxpayer is delinquent on property
taxes, the tax collector first publishes the property and
delinquent tax information. If the taxpayer does not pay
the tax, interest, and penalties, the tax collector may
then sell his or her residential property five years after
the delinquency date, or non-residential commercial
property after three years, in a tax sale if approved by
the Board of Supervisors. The tax collector generally
sells the property to a private party with the highest bid,
or sometimes to state of local tax agencies by agreement,
which then "redeem" the property.
When a taxpayer redeems the property, he or she enjoys
title of the property free of any previous encumbrances on
the property, except:
Any lien for installment of taxes or special
assessments, which become payable after the sale.
The lien for taxes or assessments imposed by tax
agencies that did not consent to the sale.
Easements of any kind.
Unaccepted, recorded, irrevocable offers of
dedication or recorded options on the property to the
public or a taxing agency for a public purpose.
Unpaid Mello-Roos special taxes and assessments
imposed under the Improvement Bond Act of 1915 not
satisfied by the sale.
Internal Revenue Service liens.
Currently, any person can challenge the validity of a tax
sale within one year of the date of the execution of the
AB 261 -- 5/11/11 -- Page 2
tax collector's deed. However, the Board of Supervisors
can rescind a tax sale with the written consent of the
county legal adviser and the purchaser of the property.
The Board of Supervisors can also rescind the sale without
the purchaser's consent in a public hearing and after
providing notice to the purchaser. In either case, the
County refunds to the purchaser the amount paid for the
property plus interest. The California Association of
Treasurer-Tax Collectors wants to make sure that counties
aren't sued by parties not directly affected by tax sales
long after the fact.
II. Prescriptive Easements : Property owners sell
"easements" to other parties in exchange for cash or other
considerations. A holder of an easement allows the
purchaser the right to perform a specific activity on the
landowner's property, such as a utility company's easement
to run transmission lines over grazing land. Most
easements are recorded documents filed with the county
recorder; however, unwritten easements are created when
someone else continuously uses another's property without
the owner's consent for at least five years, known as a
"prescriptive easement." Prescriptive easements are not
adverse possession because they are not exclusive, but
similar in the way that the holder of the easement is
hostilely using the owner's property. Prescriptive
easements are often needed when the public or another owner
cannot access a public space or his or her own property
without trespassing on another owner's property. Property
owners selling property have to disclose the existence of a
prescriptive easement, but in a tax sale, there's no owner
to disclose it. The California Association of
Treasurer-Tax Collectors wants to clarify the law to ensure
that property owners and easement holders know that such
easements pass through to purchasers of property in tax
sales.
Proposed Law
Assembly Bill 261 requires persons who challenge the
validity of a tax sale to first petition the Board of
Supervisors for a rescission within one year of the sale.
If the Board rejects the petition, the person must commence
the proceeding challenging the validity of the tax sale
within one year of the rejection. The bill applies to tax
AB 261 -- 5/11/11 -- Page 3
sales completed on or after January 1, 2012.
The measure also clarifies that prescriptive easements also
transfer to the purchaser of a property redeemed in a tax
sale.
State Revenue Impact
No estimate.
Comments
1. Purpose of the bill . According to the Author, "AB 261
is a simple measure intended to clarify current law with
respect to prescriptive easements and to simplify and
streamline dispute procedures arising from tax lien sales
of real property."
2. Get off my lawn ! AB 261 responds to the curious case
of Helen Lee and Catherine Santana v. Robert Lyles, Shirley
Lyles, and the County of Sacramento, Sacramento Superior
Ct., Case # 05AS01166. Lee and Santana sued the Lyles and
the County to invalidate a tax sale of a 10ft. wide piece
of property, which the County had six years prior sold to
the Lyles after properly noticing Lee and Santana. Lee and
Santana sued to invalidate the sale, stating they had
adverse possession, and revealed at trial that they found
it easier to park on the strip of land sold. The Court
sided with the Lyles and the County, finding that the
County followed the law, and that Lyles' owning the strip
of land did not deny Lee and Santana of access to their
property. The Court also found that Lee and Santana could
produce no evidence of adverse possession as a result of
parking there. Under AB 261, Lee and Santana could not
wait six years to sue the purchasers and the County.
Instead, they would have one year to petition the county
board of supervisors to rescind the sale, then another year
to file suit if the board declined their petition.
Assembly Actions
Assembly Revenue and Taxation 8-0
Assembly Appropriations 16-0
Assembly Floor 62-16
AB 261 -- 5/11/11 -- Page 4
Support and Opposition (6/21/11)
Support : California Association of County Treasurers and
Tax Collectors.
Opposition : Unknown.