Federal Tax Liens

By: Clark, Campbell, Lancaster & Munson, P.A.

Q: The IRS has filed a tax lien against me, and I would like to sell my home. What should I do?

A: If a person does not pay his taxes, the IRS will usually record a Notice of Federal Tax Lien in the public records of the county in which the taxpayer resides. The Notice creates a lien against any property owned by the taxpayer in that county. The Notice is valid for 10 years and 30 days after the tax is assessed unless the IRS re-records the lien in the public records or the statutory period for collection has been extended. After that period expires, the federal tax lien is “self-released.”

While the lien is in effect, the taxpayer has a few options to address the Notice of Federal Tax Lien. The first option would be to pay off the taxes owed and receive a Certificate of Release of Federal Tax Lien.

The second option would be to request from the IRS provide a “property-specific” release by a Certificate of Discharge of Property from Federal Tax Lien. This option is feasible in a short sale in which the seller will take no net proceeds at closing. But if the taxpayer takes title to the property after the Certificate of Discharge of Property from Federal Tax Lien is issued, the Certificate becomes void. This prevents the taxpayer from fraudulently obtaining a discharge, typically by conveying the taxpayer’s home to a friendly third party and then having the third party convey the property back to the taxpayer free from the federal tax lien.

The IRS may also withdraw the Notice of Federal Tax Lien based upon various grounds such as if the filing of the Notice was premature or otherwise not in accordance with administrative procedures, or if the IRS and the taxpayer enter into an installment payment plan.

Unlike most debts, a federal tax lien can be enforced against homestead property, and a federal tax lien against one spouse can be enforced against that spouse’s interest in the property both during and after that spouse’s lifetime.

If you are confronted with a federal tax lien and would like to sell your home, it may be wise to consult with an attorney to help you navigate through the issues to ensure your interests are protected and your closing goes smoothly.

The January 14th edition of “The Law” will focus on planning ahead for your 2016 taxes.

Selective Enforcement

By: Clark, Campbell, Lancaster & Munson, P.A.

Q: Is it important for homeowners associations to consistently enforce restrictive covenants and association bylaws and rules, especially when such covenants or rules are no longer desirable?

A: Homeowners associations and other “deed restricted” developments are communities with restrictive covenants and rules regarding use of property within the community. Generally, within these communities, an association is created with authority to enforce these restrictive covenants. If you live in a deed restricted community, and you would like to build a fence around your house, but the restrictive covenants prohibit construction of a fence, then even though it is your property, you cannot, excluding certain exceptions, construct a fence.

However, what happens if the association fails or selectively enforces its rules? The association consists of the property owners within the community, and its board consists of elected owners. Generally, these individuals are not attorneys with expansive knowledge of Florida law, or even their own declaration of covenants. Further, as time goes on, communities change, and restrictive covenants or rules that were desirable when the community was formed are no longer wanted or needed. As such, a community’s restrictive covenants, whether intentionally or otherwise, are oftentimes not enforced, or if they are, only sporadically and selectively.

While it may be tempting to ignore certain restrictive covenants, or provide exceptions to the same, associations should resist such actions. If an association fails to enforce a restrictive covenant, or if it enforces it only against certain owners, such restrictive covenant may become unenforceable. Therefore, if an association permits one property owner to build a cosmetically appealing fence in violation of the restrictive covenants, it may be prohibited from preventing another homeowner from constructing a fence that is much less appealing.

If there are certain restrictive covenants or rules that the association and its property owners no longer want to enforce, or at the very least want to lessen such rule’s restrictions, the better avenue, as opposed to simply ignoring these rules, is to amend the community’s covenants to reflect the desires of its owners. This will allow the association to continue to enforce its rules, while amending the rules to better conform to expectations and desires of property owners. Therefore, if a community desires to allow fences, but wants to limit types and dimensions of such fences, the association should amend its restrictive covenants to allow fences, and specifically provide for the types and dimensions of fences that are permitted.

The December 31st edition of “The Law” will discuss federal tax liens and their effect on the sale of real estate.