In 2000, the Andersons, Sylvester and Angela purchased a non-homestead Miami property as tenants by the entireties (“TBE”) and later created an LLC named “S and A Property Investment Services, LLC” ( the “LLC”) which was owned 51% by Angela and 49% by Sylvester. It is unclear why the ownership of the LLC was different than the ownership of the property prior to the transfer. The Andersons transferred the property to the LLC for asset protection from personal liability.
Prior to the transfer to the LLC, the Andersons’ property benefited from the 10% per annum increase cap. However, once they transferred the property to the LLC, the Miami property appraiser asserted a change in ownership and revalued the property at the date of the transfer without regard to the 10% cap. The real estate taxes went from $104,023 to $273,409! The LLC appealed the tax and the Value Adjustment Board found for the property appraiser.
The Florida statute provides exemptions to the loss of the 10% cap due to a change in ownership. IF the transfer is between legal and equitable title, then there is no change in ownership. The LLC filed a complaint in the civil court and the Andersons argued that the transfer was a transfer between legal and equitable title and thus, no change in ownership.
The legal title of a property refers to the legal ownership which comes with the right to control the property, i.e., the Andersons owned the property 50/50 as TBE prior to the transfer and thus had legal title. When the property was transferred to the LLC the legal ownership was in the name of the LLC.
The court noted that Crescent and Kuro applied to documentary stamp tax and not to the 10% statute at hand. The court determined that there was a transfer of ownership as the LLC is a legal entity and is a separate entity from the Andersons. Thus, the property appraiser was correct.
It is unclear to the author what the result would be if the LLC was owned in the same proportion as the property prior to the transfer.
ADVICE: Before advising a client to transfer non-homestead real estate to an entity, be sure that the client determines whether the 10% assessment cap will come off. A trip to the property appraiser’s office is a “must do” scenario in such a case. Also, for those “snowbirds” who decide to make their vacation home their homestead, be sure that the 10% assessment cap coming off is worth the Florida homestead advantages.
WORD OF THE WEEK: Value Adjustment Board (“VAB”) is an independent forum which serves as the decision-making authority when there is disagreement between the property owner and Property Appraiser concerning exemptions, valuations and classifications. Petition filing and scheduled quasi-judicial hearings are handled by the VAB to settle any disputes.
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