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Old 11-13-2006, 09:06 PM
liquid liquid is offline
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Join Date: Mar 2005
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Default Tax Proration Agreement For Home Purchase

I closed on a home in Florida on 6/1/06. Among the closing costs paid by the sellers (let's call them the Smiths) were the prorated county property taxes for 2006. These came to around $615, based on 2005 taxes of around $1,500.

The Smiths had themselves purchased the home in 2005, so the 2005 taxes of $1,500 were based on the previous owners' (let's call them the Wilsons) assessed value of the property. The Wilsons had owned the property for many years, and in Florida the annual increase in assessed value is capped at 6% for homesteaded propeties. Due to dramatic increases in property value in the area, 2005 taxes were based on an assessed value that was far under the market value of the home when it was sold in 2005. Accordingly, when the notice of 2006 property taxes was sent out a few weeks ago, taxes had indeed gone up to around $4,700.

At closing, the Smiths and I signed a Tax Proration Agreement, which states:

"We, the undersigned buyers and sellers of the above described property, hereby acknowledge that the proration of the real estate taxes that appears on the closing statement was made without the benefit of the current year's tax bill or property assessment. We approve the proration which was based on the previous year's taxes in the amount of [around $1,500]. Should the taxes for the current year differ from those for last year, we agree to make further adjustments or prorations between ourselves, and we hold [the title company handling the closing] harmless from any change in the taxes, the proration or the payment of the current year's taxes."

Am I correct in my interpretation that this means a re-proration of 2006 taxes should occur, since the Smiths' portion of 2006 taxes should be based on the actual 2006 taxes of $4,700 rather than the previous year's taxes of $1,500? (This means that the Smiths would be paying an additional $1,300 or so for 2006 taxes.)

If so, how should I go about seeking this re-proration? Should I contact my real estate agent, or the closing attorney, or the Smiths directly, or a real estate attorney?

Is there a legal obligation on behalf of the Smiths to remit to a re-proration of 2006 taxes?

Thanks in advance.
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