Real Estate Law Newsletter
| Publication year | 1981 |
| Pages | 3033 |
1981, December, Pg. 3033. Real Estate Law Newsletter
The search for new sources of income has led a number of Colorado home rule municipalities to adopt real estate transfer taxes. This column briefly reviews the real estate transfer tax ordinances which have been adopted by several Colorado municipalities and addresses the constitutional issues which might be raised by the imposition of such a tax.
The towns of Avon, Breckenridge, Crested Butte, Gypsum and Vail, and the cities of Aspen and Rifle have enacted ordinances imposing a tax on most transfers of real property.(fn1) Specific procedures and requirements contained within these ordinances vary from municipality to municipality, so the practitioner should review the individual ordinance applicable to a given situation.
Basically, a real estate transfer tax is a tax on a transfer, whether by deed or other instrument, by which real property within the jurisdiction of the taxing authority is sold, granted, assigned, transferred or otherwise conveyed from one person to another.(fn2) The proceeds of the tax are earmarked by the taxing municipality for specified municipal services, programs or capital improvement projects.
The amount of the tax is generally computed at a certain percentage of the total consideration for the transfer of the property.(fn3) The term "consideration" includes the actual cash paid, the value of the property conveyed in return for the transfer of ownership, and the amount of any lien, mortgage or other encumbrance or debt on the property.(fn4) Consideration does not include any outstanding lien or encumbrance in favor of the United States, the state of Colorado, or of a municipal or quasi-governmental corporation or district for taxes, special benefits or improvements.
There are certain transfers which are exempt from the real estate transfer tax.(fn5) The more important exemptions include the following:
---a transfer wherein the United States, the state of Colorado or any political subdivision thereof, is either the grantor or grantee;
---a transfer entailing no additional consideration for the purpose of
terminating or partitioning a joint tenancy, tenancy in common or other co-ownership;
---a transfer of title by reason of death, will or decree of distribution;
---a gift of real property where there is no consideration other than love and affection or charitable donation;
---a transfer made pursuant to business organization, reorganization or restructuring;
---a transfer to effectuate any plan confirmed or ordered by a court under the Bankruptcy Act or in an equity receivership proceeding;
---a transfer without consideration for the sole purpose of correcting or modifying a transfer previously recorded, or for making minor boundary adjustments, removing clouds of titles or granting easements, rights-of-way or licenses;
---any decree or order of a court of record quieting, determining or resting title, including a final order awarding title pursuant to a condemnation proceeding;
---a transfer to secure a debt or other obligation or a release of property which is security for a debt or other obligation;
---a transfer by deed or conveyance under execution sale or foreclosure sale under a power sale or court decree;
---a transfer made pursuant to a valid and legally enforceable contract entered into between the seller and the purchaser prior to the effective date of the ordinance and which transaction is completed within a specified time thereafter; and
---a transfer for the purpose of providing low or moderate priced housing.
The real estate transfer tax is due and payable at the time of the transfer. Depending upon the specific ordinance, the seller, purchaser, or both may be responsible for the payment of the tax.(fn6) In addition, the responsible party, at the time of transfer, must make a report to the taxing municipality, setting forth the true and actual consideration for the transfer, the names of the parties, the location of the property and any other information required. Banks, title companies, building and loan institutions, attorneys, real estate agencies or other closing agencies are authorized to collect the tax and remit the same to the taxing municipality on behalf of the responsible party.(fn7)
If the tax is not paid within thirty days from the date of transfer, it is considered delinquent, and a penalty and interest begins to accrue.(fn8) The tax and any penalty and interest, if not paid when due, constitutes a lien on the property, and may be the subject of a foreclosure proceeding by the municipality. In addition, the amount of the tax, penalty and interest becomes a debt owed to the municipality and any person liable for the unpaid tax may be punished by fine or imprisonment, or both.(fn9)
There is a question as to whether the tax is applicable in two types of transactions. The first involves...
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