I hope you are having an amazing week.
Here is what I promised, which is part 4 on Property Taxes in Puerto Rico.
I hope you find this very useful. If you have any questions don’t hesitate to call or email me.
PROPERTY TAXES IN PUERTO RICO – THE USE OF ESCROW ACCOUNTS AT CLOSING – TRANSCRIPT
Hello my name is Santiago Lampón. I am a lawyer and a notary in Puerto Rico. Now this is part 4. This is the first time I have done a 4-part episode but it is because of the subject, regarding property taxes in Puerto Rico when you are going to do a closing. Do watch the other three parts. This one let me summarize here. Part one is an introduction, part 2 is registration, part 3 is the assessment of the property. Now in part 4 I am going to tell you about the use of escrow agreements at closing. When someone purchases a property that was not registered at the property tax authority, which is CRIM, or if it was registered but it had not been currently assessed meaning: what is the value of the structure? What is the value of the land? Because the tax is percentage based. You need to assess a value and then they compete the tax. Then to do the closing, what we are doing nowadays, notaries in Puerto Rico is that we create and escrow where by the seller places into this escrow, in this account with the reputable title insurance company in Puerto Rico. The possible exposure of property taxes owed because the property had either not been registered or currently assessed.
Now this exposure is computed using the bases of the tax. Using as a base for the tax, the purchase price of the transaction and we go back to 5 years. So, it is one year, the current year plus going back 5 years, a total of 6 years. Each township in Puerto Rico may use different percentage. I am not able to tell you this. It is done at the closing or prior to the closing with do a computation. The amount is placed into an escrow, it is total the parties, the parties accept it and they actually sign an escrow agreement, agreement whereby they state what is going to happen to that money and how is it going to be dispersed, who is going to have to do what.
It is very important that yes you can close even if the property had not been registered or the property has not been assessed but it is important that you demand or promote that an escrow agreement be used. There are certain exceptions, I am not going to cover them right now, but I just wanted to let you know that it is possible to close even though there is the potential property tax liability but that it must be done in the right way. If you have any questions, please send me an email. My name is Santiago Lampón. I am a lawyer and notary in Puerto Rico and I hope you have a great day.