December 2, 2013
Most people are aware of what property they own, whether individually or through a business, but a person's understanding of his or her property may not always be consistent with the records of the county tax office – and that could be costly.
The county tax office keeps a list of all real property owned by an individual or business and located in that county, and it prepares tax bills based on those lists.[1] If the description of the real property listed under a particular owner is inaccurate, then, in addition to the obvious problem of inaccurately calculated taxes, the owner can face problems if the property is put up for sale later. Incorrect listings and inconsistencies in property descriptions in the tax maps prepared for the county tax office are often found, and the problems caused by these inconsistencies can be avoided with just a little due diligence by owners.
Tax Listings
The rules and requirements for the listing, assessment, and collection of property taxes are found in Subchapter 2 of Chapter 105 of the North Carolina General Statutes, which is known by the unusual name of the "Machinery Act" because, as stated in Section 105-272: "The purpose of this [Act] is to provide the machinery for the listing, appraisal, and assessment of property and the levy and collection of taxes on property by counties and municipalities."
The Machinery Act provides that all real property must be listed in the name of its owner. It is the owner's responsibility to provide the county tax assessor with a list of the owner's real property unless a permanent tax listing has been established by the county. Unlike business-related personal property which must be re-listed with the tax office annually, all counties in North Carolina have adopted a permanent listing of real property so individual owners are no longer responsible for providing the county tax assessor with a list of their real property each January. While convenient for owners, the fact that individuals are not responsible for preparing a list of their real property each year means that most owners do not check the listings or mapping of their real property maintained by the tax office to ensure that they are consistent with what the owner owns.
How Tax Offices Get Their Information
Each county tax office obtains the information it needs to prepare a description and a map of the real property of each owner by either requiring:
Either way, the tax office relies upon recorded documents such as deeds, subdivision plats, recombination plats, and other recorded surveys to describe the real property in its tax listings.
Tax Maps (GIS)
County tax offices also prepare maps showing the parcels of real property located in the county and identifying each owner using the Geographic Information System mapping system ("GIS Maps"). The GIS Maps are available online in almost every county in North Carolina. As stated above, the tax office prepares the GIS Maps based on recorded documents. Unless there is an obvious error in the legal description in the recorded document or the tax office is otherwise notified of a problem, the tax office prepares the GIS Maps based solely on its interpretation of the recorded documents. If the tax office revises the GIS Maps, it does not necessarily notify the affected owners.
Potential Problems
Selling the Property
In addition to the obvious (and not so obvious) problems with errors in the taxes levied against the property, as discussed below, errors in a county's GIS Maps can cause big problems with potential purchasers if not detected early. GIS Maps are readily available online and many potential buyers of real property rely on the depiction of property shown on the GIS Maps to assess what they are buying and how much they will pay in taxes. Most Registers of Deeds websites contain disclaimers warning that the GIS Maps are not to be used as legal descriptions, that they may contain errors, and that the county assumes no liability for those errors and is not liable for any action taken by users of the website in reliance on those Maps. Despite these disclaimers, many buyers rely on the GIS Maps and this can lead to false expectations or lost sales opportunities if the depiction on a GIS Map is different from the property actually owned by the seller.
A buyer may rely on a GIS Map's depiction of property to determine the size of the property, whether the property is adjacent to a public right-of-way, or whether the property abuts a body of water, all of which may be important factors to a particular buyer. A title search and survey will reveal any discrepancies between the property depicted on the GIS Map and the property actually owned by the seller, but there may not be a title search or survey if a potential buyer passes on the basis of the Map. Even if a potential buyer does not pass on a purchase, a title search may not be completed until after much time, effort, and money has already been expended by both the buyer and the seller caused by misunderstandings based on the flawed Map. Even worse, if a discrepancy exists and it is not discovered during the due diligence period, a buyer may take title to a parcel of land that is much different from the property actually conveyed.
Paying Too Much or Too Little (and the Latter Can Hurt, Too)
Another potentially more serious problem that may arise from incorrect tax listings and GIS Maps is incorrect tax bills. The listings contain the parcels on which the taxpayer is being taxed. The GIS Maps reflect what the tax office thinks is the real property contained in the tax listing upon which the tax bill is based. If the listing or GIS Map is wrong, then the tax bill is probably wrong.
These problems typically occur when a GIS Map is drawn based on the conveyance of a large tract of land identified in a deed by metes and bounds describing the parcel's boundary lines by course and distance (for example, North 85° 15' 35" West, 2,015 feet), or by using a description which identifies natural monuments such as creeks. For example, a certain parcel of land that is bordered by a creek may be described in a deed as "running with the creek." A subsequent conveyance of this property may incorrectly describe this particular call as a straight line between two points on the creek as opposed to running with the creek. If a GIS Map is prepared based on a deed with this incorrect call, more property may be attributed to the owner than is actually owned or certain portions of the property may not be listed in the name of the new owner.
If too much property is attributed to the owner, the owner will receive a tax bill that is higher than what it should be since the acreage in the tax listing will be larger than the actual acreage of the property. If some of the property actually owned is not included in the tax listing based on the GIS Map, the owner may pay a lower bill initially, but could face a steep penalty later.
Why is that so? Because the property not depicted on the GIS Map as owned by the owner pursuant to the deed may be incorrectly listed under "unknown owner," or not listed at all! County tax assessors are charged with determining who owns land listed as "unknown owner" or not otherwise listed. When this property is discovered and the name of the owner is ascertained, that owner will receive a tax bill for that parcel of land for the year in which the property and owner were discovered, the preceding years the owner owned the property up to five years, interest charges on the taxes for the preceding years, and a penalty of 10% of the amount of the tax bill for the earliest year in which the property was not listed, plus an additional 10% tax for each subsequent listing period that elapsed before the property was discovered. So, the total taxes and penalties due in 2013 for a parcel which should have been taxed annually for $1,000 and which was "discovered" after the listing deadline for 2013 taxes would be $8,100, calculated as follows:
Years Property Not Listed
Tax Due for Each Year Unlisted
Penalty for Failure to List
Total Penalty by Year
