Did outstanding non-delinquent ad valorem taxes or special-assessment liens remaining on transferred property count as deed consideration?

Plain-English summary

Special-purpose entities sometimes took title to development property while current ad valorem taxes and community-development-district special assessments remained as liens against the land.

The Department distinguished those public-charge liens from mortgages. Mortgage debt secures a contractual obligation and enters deed consideration, while the non-delinquent taxes and assessments at issue ran with the property and could not produce a personal deficiency judgment against the owner.

The present or future value of those outstanding non-delinquent liens was therefore not included in documentary-stamp-tax consideration. The TAA did not address other forms of value or resolutions involving delinquent assessments.

What this means for you

Classify every lien by its legal source and the owner's obligation. The ruling does not provide a general exclusion for all encumbrances appearing on title.

Common questions

Were current non-delinquent property-tax liens consideration? No.

Were the described special-assessment liens consideration? No.

Did the ruling exclude mortgage balances? No; it expressly distinguished mortgages.

Citations and references

• Fla. Stat. § 201.02(1)(a), as cited in the advisement.

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 11B4-010

Original ruling text

Executive Director
Lisa Vickers

TAX: Documentary Stamp Tax
TAA NUMBER: 11B4-010
ISSUE: Consideration for Deeds Subject to Ad Valorem and/or Special Assessments Liens
STATUTE CITE(S): Section 201.02(1)(a), F.S.

QUESTION: Does consideration for purposes of documentary stamp tax on deeds, include the present or
future value of outstanding ad valorem tax or special assessment liens that are not discharged at the time
of transfer of the property, but remain as liens on the property.
ANSWER: The inclusion of current ad valorem property taxes or special assessments does not fall within the parameters of
consideration as it relates to the imposition of documentary stamp tax. Therefore, consideration for purposes of documentary
stamp tax on deeds does not include the present or future value of the outstanding non-delinquent ad valorem tax or special
assessment liens that are not discharged at the time of transfer, but remain as liens on the property.

August 11, 2011
XXX
XXX
XXX
Re:

Technical Assistance Advisement No. 11B4-010
Documentary Stamp Tax – Consideration for Deeds Subject to Ad Valorem Tax and/or Special
Assessment Liens
Section 201.02(1)(a), F.S.
Special Purpose Entities (“Taxpayers”)
Taxpayer 1
Taxpayer 2
Taxpayer 3
Taxpayer 4
Taxpayer 5
Taxpayer 6
Taxpayer 7
Taxpayer 8
Taxpayer 9

Dear XXX:
This is in response to your letter dated XXX, requesting a determination whether “consideration” for
documentary stamp tax includes ad valorem tax and/or special assessment liens which run with the title to
real property and are not discharged or released at the time the real property is transferred. This response
Child Support Enforcement – Ann Coffin, Director z General Tax Administration – Jim Evers, Director
Property Tax Oversight – James McAdams, Director z Information Services – Tony Powell, Director

www.myflorida.com/dor
Tallahassee, Florida 32399-0100

Technical Assistance Advisement 11B4-010
Page 2

constitutes a Technical Assistance Advisement under Chapter 12-11, Florida Administrative Code
(F.A.C.), and is issued to you under the authority of Section 213.22, Florida Statutes (F.S.).
FACTS PRESENTED BY PRACTITIONER
The Taxpayers were created for the benefit of various community development districts (“CDDs”) (or the
holders of the bonds issued by them), which themselves were created pursuant to the provisions of
Chapter 190, F.S. CDDs are special purpose governmental entities classified under Chapter 189, F.S., as
independent special districts. Like counties and cities, CDDs are authorized to issue tax-exempt bonds
which constitute public debt and serve a public purpose, with the bond proceeds used to finance public
infrastructure and roads. CDDs are granted the statutory authority to impose both ad valorem taxes (“real
property taxes”), and non ad valorem assessments (“special assessments”), and routinely use revenues
received from the imposition of special assessments against the properties benefitted by the public
infrastructure to secure the bonds issued by the CDDs. Such special assessments may be collected
pursuant to Chapter 170, F.S. (municipal assessments), or Chapter 197, F.S. (on the ad valorem tax bill),
with the former generally referred to as “direct billing,” and the latter referred to as “on the tax roll.” The
CDDs at issue have used each of the two collection processes, and in either case, the assessment becomes
a lien against the property from the date of imposition until paid and is coequal with the other liens for
property taxes and special assessments. In the event of non-payment, a lien for an assessment collected
pursuant to the “direct billing” or “on the tax roll” process is either foreclosed pursuant to legal
proceedings or via the tax certificate process, respectively.
When landowners default in payment of their special assessments, the bondholders are at risk of
nonpayment, and in order to protect their interests, the bond trustee must determine whether to negotiate a
resolution with the defaulting landowner(s) or utilize the legal process to collect the unpaid assessments.
Foreclosure of the lien is not an attractive option for numerous reasons, and it results in eliminating the
bond debt assessment lien on the property. Instead of utilizing the foreclosure option, an amicable
resolution is frequently reached via an agreement whereby the CDD (or a special purpose entity (“SPE”)
created by or at the direction of the CDD or the bond trustee for this specific purpose) temporarily takes
title to the property in default so it can be transferred to another person who will continue to develop it as
planned. An SPE is used to take title to the property, instead of the CDD, because a direct conveyance of
the property to the CDD would result in a merger of the lien and title interests, effectively eliminating the
bond assessment lien of the CDD. As with ad valorem debt, because the special assessment debt is against
the property itself and not against the property owner, there is no ability for a CDD to secure a deficiency
judgment against the defaulting property owner. When a property owner does default on payment of
special assessments, the transfer of the property typically occurs with: no money or a nominal amount paid
to the defaulting landowner; no discharge of any lien on the property; no existing mortgage debt on the
property; and no other consideration paid in exchange for the property. However, because current year ad
valorem taxes become a lien on the property on January 1st and special assessments become a lien when
imposed until paid, unless a grantee acquires property at the precise time that all current year’s taxes and
special assessments have been paid, and there is no long term debt on the property, there will be
outstanding liens for both ad valorem taxes or special assessments on the property when it is conveyed.

Technical Assistance Advisement 11B4-010
Page 3

At times, the CDD may agree to a discharge of some or all of the delinquent special assessments against
the property, without releasing the assessment lien relative to future payments remaining outstanding. In
other cases, the agreement to transfer the property may involve some other non-monetary consideration,
i.e., a commitment to complete an obligation of the seller under a Development Agreement. However, the
Taxpayer is not requesting a ruling from the Department whether either of these remedies results in
taxable consideration for the transfer of the properties. Instead, the request is limited to the issue of
whether non-delinquent ad valorem tax and special assessment liens existing on the properties transferred
to the SPEs constitute “consideration” paid for the property for purposes of s. 201.02, F.S.

REQUESTED RULING
You request that we rule whether consideration for purposes of documentary stamp tax on deeds, includes
the present or future value of outstanding ad valorem tax or special assessment liens that are not
discharged at the time of transfer of the property, but remain as liens on the property.
LAW AND DISCUSSION
Documentary stamp tax is imposed on deeds and other instruments that transfer an interest in Florida real
property at the rate of $.70 per $100 or fraction thereof based on the consideration for the property interest
transferred.

Effective July 1, 1990, s. 201.02, F.S., was amended to include examples of consideration. This language
reads in part:
(1)(a) . . . the money paid or agreed to be paid; the discharge of an obligation; and the amount of
any mortgage, purchase money mortgage lien, or other encumbrance, whether or not the
underlying indebtedness is assumed. If the consideration paid or given in exchange for real
property or any interest therein includes property other than money, it is presumed that the
consideration is equal to the fair market value of the property or interest therein. (e.s.)
Prior to this amendment, the Florida courts held that when a deed transferred property with an outstanding
mortgage which the purchaser either assumed and agreed to pay or took “subject to,” the consideration for
the transfer was equal to the mortgage balance. Raspberry v. Dickinson, 243 So.2d. 236 (Fla. 1st DCA
1971); Kendall House Apartments, Inc. v. Department of Revenue, 245 So.2d 221 (Fla.1971). The 1990
law change reflects these rulings by referencing the transfer of mortgage debt. However, there is no
evidence of any court case in Florida which ruled that non-mortgage liens on property of the type at issue
here should be included in the measure of “consideration” paid for the property.
DEPARTMENT’S POSITION
A deed which transfers an interest in Florida real property is taxable under s. 201.02(1)(a), F.S., based on
the consideration for the property interest transferred. The statute, regulations, and related court cases all

Technical Assistance Advisement 11B4-010
Page 4

provide support for the determination that consideration includes any outstanding mortgages on the
property transferred. However, the inclusion of current ad valorem property taxes or special assessments
within the parameters of consideration as it relates to the imposition of documentary stamp tax is not
supported by any definitive statutory language, regulation, or court cases.
A mortgage secures a contractual agreement between a property owner and a lien holder. In contrast, ad
valorem taxes and special assessment liens are imposed to secure payment of public monies, and are not
debts which can become a personal judgment against the property owner. The existence of liens for ad
valorem taxes and special assessments which travel with the property is commonplace; however, the
Department has never opined that such liens represent a mortgage or lien as contemplated under s.
201.02(1)(a), F.S.
Based on reasons and situations stated, consideration for purposes of documentary stamp tax on deeds
does not include the present or future value of the outstanding non-delinquent ad valorem tax or special
assessment liens that are not discharged at the time of transfer, but remain as liens on the property.
This response constitutes a Technical Assistance Advisement under s. 213.22, F.S., which is binding on
the Department only under the facts and circumstances described in the request for this advice as specified
in s. 213.22, F.S. Our response is predicated on those facts and the specific situation summarized above.
You are advised that subsequent statutory or administrative rule changes or judicial interpretations of the
statutes or rules upon which this advice is based may subject similar future transactions to a different
treatment than expressed in this response.
You are further advised that this response, your request and related backup documents are public records
under Chapter 119, F.S., and are subject to disclosure to the public under the conditions of s. 213.22, F.S.
Confidential information must be deleted before public disclosure. In an effort to protect confidentiality,
we request you provide the undersigned with an edited copy of your request for Technical Assistance
Advisement, the backup material and this response, deleting names, addresses and any other details which
might lead to identification of the taxpayer. Your response should be received by the Department within
15 days of the date of this letter.
Sincerely,
Joy. B. Eldred, CPA
Tax Law Specialist
Technical Assistance and Dispute Resolution
JBE/tlf
Record ID: 100182