As discussed previously in this column, one of the adverse realities of the non-regulated NHD Industry is the pressure it places on California Realtors®; pressure to clearly understand seller/agent disclosure requirements. Obviously, if you’re uncertain of your responsibilities, how could you possibly know if your NHD provider is satisfying them? Without an agency overseeing the production of these reports, compliance is never assured. NHD providers aren't consistent in their reports.....like title policies or termite inspections! In fact, you may not be getting what you think you’re getting from your disclosure provider!
Unfortunately, this dubious situation commands that agents exercise due diligence in the selection of a third-party provider.
One of the more complex requirements that California Realtors® encounter is the multipart disclosure of direct assessments such as Mello-Roos. In fact, one in three homes in California are located in an Assessment District. However, when quizzed, most Realtors® have no idea what specifically is required to be disclosed when selling a home located in a special assessment district; instead, relying on their NHD provider to provide the required information.
But, what happens when the NHD provider fails to provide all the necessary disclosures……instead, renouncing any perceived fulfillment in an often unread fine print disclaimer that is buried in the back pages of the report? My advise.......Read the Fine Print! You don't want an attorney discovering language that you should have read and understood. If the tax and assessment report fails to provide any one of the six requirements, it is considered non-compliant and allows the buyer an opportunity to sue for damages. Upon closer look, you may find that you provider actually recommends that an appropriate professional be retained instead of providing you with all the information needed for compliant disclosure....leaving you and your seller exposed to liability for non-disclosure.
Under current law, the following information must be disclosed to a potential buyer. The information is available, but difficult to locate and interpret. To comply with the requirements, the seller and/or their agents are responsible for providing:
The Annual Tax Due for the Mello-Roos Entity for the Current Tax Year(Obvious requirement for obvious reason)
The Date Until the Tax May Be Levied Against The Property For The Mello-Roos Entity (Although typically these bonds have a 15 – 25 year lifespan, new buyer simply picks up where the seller left off)
The Maximum Tax That May be Levied Against the Property in Any Year (Most assessments start off low and increase over several years to a predetermined maximum amount, oftentimes doubling or tripling the original amount of the annual assessment. Failure to provide this pre-determined amount will conceal thousands of dollars of obligated funds).
The Percentage by which the Maximum Tax for the Mello-Roos Entity May Increase Per Year (Sometimes…not always….there are provisions allowing the maximum assessment to increase by a small percentage, usually 1% or 2%)
The Name of the Mello-Roos Entity Levying Taxes Against the Property (This will basically tell you what you are paying for)
A Contact Telephone Number, if available, for further Information About the Mello-Roos Entity (Any questions regarding the assessment should be directed to the appropriate agency)
Disclosure Source is the only NHD provider that......
Obtains current, correct tax data for the subject property,
Reviews and interprets the data to determLocates the administering agencies, private consultants, etc. and provides an official "Notice of Special of Tax or Assessment"
Remember, regulation assures protection for the consumer. Until the NHD Industry becomes regulated, consumers will remain unprotected! Who are the consumers; the Realtor® and the seller…that’s who!
California Realtors® can continue to rely on Disclosure Source to provide all mandatory disclosures for Mello-Roos and 1915 Bond Assessments.
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