Resident warns: check portability of homestead savings before sale

INDIAN RIVER COUNTY – An unintended consequence of the portability law which allowed homeowners to take their homestead savings to their next home purchase has one beachside resident willing to go to the state Supreme Court to seek redress.

Stephen Boyle runs a commercial and residential appraisal business in Indian River County, and is well aware of real estate rules and regulations. He is seeking hundreds of thousands of dollars in portability carry-over that he claims he was denied due to a glitch in the law that prevents him from contesting the market value of the home as determined by the property appraiser’s office.

At issue is a home he owned and sold in the Moorings in 2009.

Before he went to the statutes to look up the exact requirements of the portability law, he was figuring on being able to take the homesteaded tax savings to his new home somewhere near the $500,000 maximum limit.

“I never had really looked into portability nor had I ever had anybody hire me for a portability case, and it wasn’t until my house was under contract in May 2009 I started looking into portability to find out how much I could take to my new house,” he said.

Portability is a calculation based on the fair market value of your home as determined by the tax appraiser’s office minus the assessed value of your home, which factors in the homestead deduction available to Florida homeowners.

The longer you own your home, and especially in boom times, the gap between your assessed value and market value can become quite significant.

“For portability you want your market value as high as possible,” Boyle said.

What many people have not noticed in this era of declining real estate is that their market value has been decreasing, focusing instead on the assessed value, which is the basis of the taxes you pay.

“It is one of those things. As long as you are protected by homestead, most people don’t every actually look on their bills to see what the market value of their house is. They just look at their assessed value,” he said.

In a declining market you can see the market value of your home lowered but the assessed value increase by as much as 3 percent a year due to a statutory requirement that the tax assessor bridge the gap between the market value and assessed value.

In Boyles’ case, he sold his home in May 2009 for $1.8 million.

The property appraiser had the home’s fair market value at $1.1 million for the 2009 tax year with an assessed value of $1.05 million, a difference of $50,000.

Based on the sale value of the home, Boyle expected a carry-over $700,000 (which is capped by law at $500,000) – that is, the sale price of $1.8 million minus the $1.1 million fair market value assigned by the county.

“It wasn’t until I actually looked it up that I realized that the portability equation was not based on the market value of your house according to the sale price, but on what the property assessor perceived to be the value of your house,” Boyle said. “You would think portability would be based on the difference between what the house sold for rather than what the tax assessor said it was worth.”

Should he prevail, Boyle estimates it could mean well over $100,000 in tax savings over the time he plans to live in his new home.

“If I got the $500,000 portability as opposed to the $50,000, that is a $450,000 difference,” he said. “That amounts to about $8,000 savings per year, which is a significant amount of money if you are going to be in the house for 15 or 20 years.”

Boyle’s lawsuit is based on the fact that he was denied a hearing to contest the property appraiser’s assessment of the fair market value of his home on Jan. 1, 2009, when the determination was made and he still owned the home.

“I didn’t find out I couldn’t appeal until Dec. 1 (2009), the day of my hearing,” he said. “The hearing started and the property assessor presented their evidence on how they established the market value of my house and when it came time for me to present my evidence, the property appraiser’s attorney said, ‘Since you have actually sold your house, you are not the taxpayer and if you are not the taxpayer, we cannot hear this case.'”

The Special Magistrate hearing the case agreed on the technicality and Boyle was left with $50,000 in portability.

Putting aside the merits of Boyle’s case about the value of his home, his lawsuit is now in the District Court of Appeals.

It is based on being denied the ability to have his case heard even though he followed all rules and regulations regarding filing an appeal.

“I have already spent probably three years of tax savings in legal fees,” he said. “My whole point with this is I am being denied due process, and it is taxation without representation because of this loophole in the law.”

Mickey Umphrey, chief deputy appraiser in the county tax appraiser’s office, said in the Boyle case his office was following the letter of the law, something Boyle does not dispute.

And there is a flip side to Boyle’s argument.

If he is able to increase the taxable value of the property to the sale price rather than the tax assessors’ determination of fair market value, the current homeowner and taxpayer will see his taxes raised.

“If the previous homeowner is able to get the taxable value of the home increased, then the new owner, who didn’t file the appeal and will be the person paying the taxes at the time they come due, will get a tax increase without any say so,” Umphrey said.

Boyle pointed out there would be no increase in the taxes for 2009 as that determination was figured on Jan. 1 when all such property tax obligations are set.

He also points out for tax year 2010 the tax assessor’s office would be required to re-establish fair market value because of the change in ownership.

“That is why Realtors advise clients purchasing homesteaded properties that real estate taxes will increase, and to anticipate paying real estate taxes based on approximately 2 percent of the purchase price,” he said.

The case is the only one of its kind in the state right now to reach the court system, and Boyle has no intention of giving up.

“We have looked very carefully throughout the state, most everybody who got into this quagmire did not file in a timely basis for their appeal,” he said. “It will probably end up at the Supreme Court because it comes down to constitutional issues. Eventually they are going to have to change the statute either by the Florida Supreme Court or by the Legislature.”

In the meantime he warns homeowners thinking of buying a home and factoring in their portability into the cost equation to know and understand the law as it is written.

“It is something a lot of people need to understand,” he said. “If you have your house for sale and it is homesteaded, you need to know what the appraiser’s office has done with the market value of your home.”

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