Notes

Community Development District
local, special purpose government framework authorized by Chapter 190 of the Florida Statutes as amended and is an alternative to municipal incorporation for managing and financing infrastructure required to support development of a community. Developers finance the infrastructure by issuing bonds. Tax assessments are imposed on the homeowners to repay the bonds. These assessments are in addition to county and city property taxes.

Subsequent to the establishment of a district under this chapter, each contract for the initial sale of a parcel of real property and each contract for the initial sale of a residential unit within the district shall include, immediately prior to the space reserved in the contract for the signature of the purchaser, the following disclosure statement in boldfaced and conspicuous type which is larger than the type in the remaining text of the contract:
"THE (Name of District) COMMUNITY DEVELOPMENT DISTRICT MAY IMPOSE AND LEVY TAXES OR ASSESSMENTS, OR BOTH TAXES AND ASSESSMENTS, ON THIS PROPERTY. THESE TAXES AND ASSESSMENTS PAY THE CONSTRUCTION, OPERATION, AND MAINTENANCE COSTS OF CERTAIN PUBLIC FACILITIES AND SERVICES OF THE DISTRICT AND ARE SET ANNUALLY BY THE GOVERNING BOARD OF THE DISTRICT. THESE TAXES AND ASSESSMENTS ARE IN ADDITION TO COUNTY AND OTHER LOCAL GOVERNMENTAL TAXES AND ASSESSMENTS AND ALL OTHER TAXES AND ASSESSMENTS PROVIDED FOR BY LAW."

Appropriation
The actual method by which a district imposes a tax is called appropriation. A district passes a law or ordinance that states the details of the proposed tax, and the district obtains authority to collect needed funds for the proposed expenditures. Finally, the district officially imposes the tax, an action called a tax levy.

Assessments must be made annually in Florida, which requires every governmental institution to use the assessment made by county assessors (there are no federal taxes on real estate ownership).
The new tax year begins on January 1. Property is assessed at this time (every year). Taxes not paid before January 1 become a lien against the property. After April 1, all taxes for the previous year must be paid in full. Property taxes are delinquent if not paid by April 1. Property taxes for the current year are due. The tax year ends on December 31.
Because the term of taxation is January 1 through December 31, the taxes are said to be based on a calendar year. The tax year begins on January 1; this is also the time when taxes become a lien on property. Taxpayers in Florida may choose to pay their taxes earlier than the April 1st deadline. This option is attractive because it allows a small discount. Tax statements are sent to property owners on November 1st of each year. If the property owner pays his or her taxes in November there is a 4% discount off the property tax bill, 3% in December, 2% in January, and 1% in February.

Priority of Real Estate Tax Liens
When a court sale of a parcel of real estate occurs, money is paid out according to the priority of liens. Real estate taxes have the highest priority, and special assessments are paid next. After these have been fully paid, liens are generally paid out in the order in which they were recorded in the county clerk's office (or when they took effect). IRS tax liens (discussed later) do not take priority over previously recorded liens; they are general liens and attach to all of the property a person owns.

Example: A parcel of land is sold by a court to receive payment for a second mortgage; the lien was recorded in June 2002. The first mortgage was recorded in May 1997. The property owner never paid a contractor for improvements performed in September 2000, for which a mechanic's lien took effect in January 2001. A special assessment was levied for curb improvement on the property in August 2003. Back real estate taxes are also owed. The order of payment from the proceeds of the sale is as follows:
The property taxes are paid first.
The special assessment for curb improvement, along with any outstanding general real estate taxes, is paid second.
The first mortgage is then paid off because it was recorded earliest.
Next, the contractor is paid according to the mechanic's lien that took effect in 2001.
The lender for the second mortgage then receives payment.
Finally, if there are any proceeds left over from the sale, the property owner receives the remainder.
Despite many interests in this property, the taxes and special assessment will be paid first.

Nonpayment of Real Property Taxes
Florida law requires that all real estate taxes be paid by March 31 each year. If those taxes are not paid, the law requires Tax Collectors to conduct an auction and sell "tax certificates" on or before June 1st. A tax certificate sale is not a sale of land, but rather is a lien against the subject property. Delinquent taxes are advertised in a local newspaper prior to the tax certificate sale. The tax certificate sale is open to the public and participants purchase the certificates as investments. The tax certificate sale is conducted in a manner similar to an auction but is different from a typical auction in that bidders are bidding on rates of interest. In essence, the bidders are extending a loan at a specific interest rate, to pay the delinquent taxes for the property owners.

(13.05.2016) Tax Certificate Auctions
The tax certificate sale is conducted electronically on the internet on or before June 1 every year. The bidder who is willing to accept the lowest rate of interest is awarded the certificate. The bidding starts at 18% interest. He or she will then pay the tax collector the delinquent taxes, late-payment penalties, costs of the sale, and advertising charges. The total amount paid for each certificate becomes the face value of the certificate. The bidder will earn interest on the face of the certificate at the rate bid, from June 1 to the date the certificate is redeemed by the property owner. Interest is calculated using the simple interest method. Regardless of when the certificate is redeemed, the certificate holder will earn a minimum of five percent unless the interest bid was zero percent.

Redemption
Property owners who eventually redeem their tax certificates are required to pay to the Tax Collector the face of the certificate, all accrued interest, and a redemption fee. The face amount plus accrued interest is remitted to the bidders.

Foreclosure Sales
Property owners who still have not paid their delinquent real estate taxes within two years after the taxes became delinquent are risking forfeiture of their property in a "tax deed sale." After two years, a certificate holder may apply to the Tax Collector for a tax deed by surrendering his or her certificate(s) on the property, redeeming all other outstanding certificates, and paying certain other fees and costs including the current taxes. After the tax deed application is received and all amounts are paid, the Tax Collector notifies the Clerk of the Circuit Court. The Clerk of the Circuit Court notifies the property owner, lien holders, and then advertises the pending tax deed sale.

If taxes remain unpaid, the actual real estate is then auctioned to the highest bidder by the Clerk of the Circuit Court. The minimum or opening bid is the sum of all taxes, interest, costs, and fees paid up until the sale. If the property is homestead property, one-half of the latest assessed value of the property must be added to the minimum opening bid. The tax deed applicant receives his money back from the sale proceeds plus one and one-half percent interest per month from the time the application is made until the land is sold.

Foreclosure Sales
Prospective bidders who plan to participate in the tax certificate sale should research the properties on which they plan to bid. Some of the parcels may be easements, landlocked property, alleyways, or other property that has little or no value. There are no guarantees that tax certificates will turn out to be good investments. By law, certificates are canceled after seven years unless extended by some administrative action such as bankruptcy. Certificates can be canceled due to certain statutory errors, in which case the bidder will receive eight percent interest or the bid amount, whichever is lower.

The tax certificate sale is a method by which the various taxing authorities may still receive tax revenue when property owners do not pay their taxes. The taxing authorities receive money that funds their budgets and certificate buyers earn interest on their investments. The tax certificate sale should not be considered a direct way to obtain land.

Lesson Summary
The lesson began with a discussion of liens, because the two main types of real estate taxes are tax liens. Liens are claims or charges against property that serve as security for obligations or debt. A lien does not usually constitute ownership of a property, but it does represent a claim against the property if the owner fails to pay a debt. Liens in real estate are usually attached to a specific parcel; although property with a lien can be sold, the lien will accompany it. Liens are a type of encumbrance, a term referring to any claim against a property that affects its title or use. Not all encumbrances are liens, but all liens are encumbrances. Liens are classified as general or specific, voluntary or involuntary and statutory or equitable.

The two main taxes affecting real estate are ad valorem taxes and special assessments. Taxes can be generally classified as progressive, regressive or proportional.

Ad valorem taxes are general real estate taxes that can be levied by many types of governmental bodies. Some parcels of real estate are exempt from these taxes, such as nonprofit organizations. Real estate is appraised, or assessed, for tax purposes by county assessors; if particular districts are appraised below or above surrounding districts, the state may apply an equalization factor to make the distribution of the tax burden fair.

The Florida Supreme Court has decided that property must be appraised at the just value, which means an amount determined by fair and objective valuation methods. Property owners must be given notice of the assessment, and owners have the right to protest if they believe an assessment is unfair. An owner can first file a protest with the county tax assessor's office; if this fails, the owner can appeal to Florida's Value Adjustment Board, and if that fails, then the owner can pursue the matter in court.