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MAINE BUREAU OF CONSUMER CREDIT PROTECTION

35 SHS, Augusta, Maine 04333

State Agencies Highlight New Maine Law Intended to Protect Real Estate Buyers and Sellers

August 3, 2008

AUGUSTA, MAINE – State officials have announced that a new law (effective June 30th) protects the buyers and sellers of real estate in Maine by raising awareness about tax obligations when property is purchased or sold.

Because of concerns raised by property owners and municipal officials, a State law was enacted this year to highlight the fact that payment of property taxes is the legal obligation of the person who owns a piece of property on April 1st each year—even if that individual is no longer the owner on the subsequent tax due date.

Representatives of the Bureau of Consumer Credit Protection and Maine Revenue Services explained that if a new owner fails to pay property taxes when they are due, then the municipality files a tax lien. However, the lien is filed in the name of the owner of record as of the previous April 1st, even though that individual no longer owns the property. This lien can negatively affect the seller’s credit report.

“Buyers and sellers of real estate must be aware of their property tax obligations,” commented William N. Lund, Superintendent of the Bureau of Consumer Credit Protection. “This new law will raise awareness of the issue, and will also provide a legal remedy in cases in which buyers and sellers either don’t understand their responsibilities or intentionally ignore them.”

Superintendent Lund joined the Director of Maine Revenue Services’ Property Tax Division, David P. Ledew, to emphasize that when a property is sold, the buyer and seller may agree to divide, or prorate, the taxes, but if any part of those taxes is not paid, a lien is filed in the name of the person who owned the property on April 1st. The seller’s credit report may be negatively impacted as a consequence of the lien.

The seller also has an important obligation; namely, forwarding any tax bills mailed to the seller’s address, on to the buyer for payment. Any unsatisfied municipal tax lien can ultimately result in the buyer losing ownership of the property.

In cooperation with the Bureau of Consumer Credit Protection and as required by the new law, Maine Revenue Services is providing notice and guidance to each municipal office and to real estate agents, real estate lenders, settlement agents, the Maine State Housing Authority and others. Those individuals and entities are expected to make a copy of the guidance document available to buyers and sellers at any point at a real estate closing when the allocation of property taxes is discussed and with any notices relating to property tax liens.

The law also contains a provision permitting either a buyer or a seller who’s harmed by the other’s failure to pay prorated taxes, to file a civil action for damages. The prevailing party can also use that civil judgment to correct that party’s credit report.

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The Maine Bureau of Consumer Credit Protection was established in 1975 to enforce a variety of credit-related consumer laws. The Office licenses lenders, creditors and collectors; conducts periodic examinations of creditors to determine compliance with state laws; and responds to consumer complaints and inquiries. The Office also conducts educational seminars and provides speakers to advise consumers and creditors of their legal rights and responsibilities.