Q: May we pay the property taxes in Texas for 2016 and insure that 2017 taxes are “not yet due and payable”?
A: Short Answer is “no”. Please read on as Procedural Rule P-20.C.1 found in the Basic Manual of Rules, Rates and Forms for the writing of Title Insurance in the State of Texas contains the phrase “for the year of the issuance of the Loan Policy or Interim Binder” therefore the “no” answer applies to all transactions closing in 2016 with the date of the policy also being in 2016. However, if the transaction is closing the last of December and the documents will be recorded in January and thus the policy will reflect a date of January 2017, the Schedule B exception may be issued to show that 2017 taxes are “not yet due and payable” if the 2016 taxes are collected and paid at closing.
The pertinent part of Procedural Rule P-20 reads as follows:
- TAXES NOT YET DUE AND PAYABLE
In connection with the issuance of a Loan Policy or Loan Title Policy on Interim Construction Loan (Interim Binder), upon payment of the premium in
R-24, a Company may:
- If satisfied that all taxes, standby fees and assessments by any taxing authority for the year of the issuance of the Loan Policy or Interim Binder are not yet due and payable, add the following after the standard tax exception: “Company insures that standby fees, taxes and assessments by any taxing authority for the year _____ are not yet due and payable.” The addition may be made either by checking the appropriate box on a Form T-2 or by otherwise inserting the additional words into the form.
As a reminder, if the “not yet due and payable” coverage cannot be issued, the $5 premium (Rate Rule R-24) may not be collected. You may review the entirety of P-20 which is the “Standard Exception Relating to Taxes” procedural rule here: http://www.tdi.texas.gov/title/titlem4c.html#p20. Enjoy the last few weeks of 2016.