Understanding Melo Roos

By
Real Estate Agent with Crain Realty - North County Luxury Homes BRE # 01358766

Understanding Mello-Roos

In purchasing your new home, your future monthly payments will be made up of principal, interest, real property taxes and insurance, but what is the tax for the Community Facilities District, otherwise known as a Mello-Roos District? The CLTA has answered some of the questions most commonly asked about the Mello-Roos Community Facilities Act.

What is a Mello-Roos District?

A Mello-Roos District is an area where a special tax is imposed on those real property owners within a Community Facilities District. This district has chosen to seek public financing through the sale of bonds for the purpose of financing certain public improvements and services. These services may include streets, water, sewage and drainage, electricity, infrastructure, schools, parks and police protection to newly developing areas. The tax you pay is used to make the payments of principal and interest on the bonds.

Are the assessments included within the Proposition 13 tax limits?

No. The passage of Proposition 13 in 1978 severely restricted local government in its ability to finance public capital facilities and services by increasing real property taxes. The "Mello-Roos Community Facilities Act of 1982" provided local government with an additional financing tool. The Proposition 13 tax limits are on the value of the real property, while Mello-Roos taxes are equally and uniformly applied to all properties.

What are my Mello-Roos taxes paying for?

Your taxes may be paying for both services and facilities. The services may be financed only to the extent of new growth, and services include: Police protection, fire protection, ambulance and paramedic services, recreation program services, library services, the operation and maintenance of parks, parkways and open space, museums, cultural facilities, flood and storm protection, and services for the removal of any threatening hazardous substance. Facilities which may be financed under the Act include: Property with an estimated useful life of five years or longer, parks, recreation facilities, parkway facilities, open-space facilities, elementary and secondary school sites and structures, libraries, child care facilities, natural gas pipeline facilities, telephone lines, facilities to transmit and distribute electrical energy, cable television lines, and others.

When do I pay these taxes?

By purchasing an interest in a subdivision within a Community Facilities District you can expect to be assessed for a Mello-Roos tax which will typically be collected with your general property tax bill. These special tax payments are subject to the same penalties that apply to regular property taxes.

How long does the tax stay in effect?

The tax will stay in effect as long as it is needed to pay the expenses of services or until the principal and interest on the bonds are paid off along with any reasonable administrative costs incurred in collecting the special tax or so long as it is needed to pay the expenses of services, but in no case shall exceed 40 years.

What happens if a general tax payment is not made on time?

Because the Mello-Roos tax is typically collected with your general property tax bill, the Facilities District that obtained the lien may withdraw the assessment from the tax roll and commence judicial foreclosure.

What is the basis for the tax?

Most special taxes levied on properties within these districts have been structured on the basis of density of development, square footage of construction, or flat acreage charges. The act, however, allows for considerable flexibility in the method of apportionment of taxes, and the local agencies may have established an e3ntirely different method of levying the special tax against property in the district in question.

How much will the Mello-Roos payment be?

The amount of tax may vary from year-to-year, but may not exceed the maximum amount specified when the district was created. In the case of the purchase of a new house within a subdivision, the maximum amount of the tax will be specified in the public report. The Resolution of Formation must specify the rate, method of apportionment, and manner of collection of the special tax in sufficient detail to allow each landowner or resident within the proposed district to estimate the maximum amount that he or she will have to pay.

How is the special tax reflected on the real property records?

The special tax is a lien on your property, essentially like a regular tax lien. The lien is recorded as a "Notice of Special Tax Lien" which is a continuing lien to secure each levy of the special tax.

How are Mello-Roos taxes affected when the property is sold?

The Mello-Roos tax is assessed against the land, but is not based upon the value of the property, therefore the possible increased value of the property does not affect the amount of the tax when property is sold. The amount of the tax may not exceed the original maximum amount stated in the Resolution of Formation. Any delinquent payments must be satisfied before the sale of the real property since the unpaid amounts are a lien against the property.

The Title Consumer is published by the California Land Title Association. Member companies of the California Land Title Association are dedicated to facilitating the transfer of real property throughout California and increasing the public's awareness of the value and purpose of title insurance.

close

This entry hasn't been re-blogged:

Re-Blogged By Re-Blogged At
Tags:
california real estate
melloroos taxes
san diego county real estate

Post a Comment
Spam prevention
Spam prevention
Show All Comments
Anonymous
Anonymous

I want to buy a house in Murrieta CA but I dont want to pay Mello Roos.

Aug 17, 2009 10:28 PM #19
Anonymous
kal

are those melo rose  consider  deductions? when you file for income tax ?

 

Aug 28, 2009 11:38 PM #20
Anonymous
Tom N

The seller is the primary person that has to disclose the Melo-Roos tax to the buyer.  You can sue the seller for damages if he or she did not disclose this tax. Your real estate agent is also responsible for disclosing this tax.  You might want to check the "transfer disclosure statement" that was provided to you when you signed the contract to buy your home.  This is a legal document that must be provided to you before heading to closing.  If you were provided with the TDS then the seller and your agent is off the hook.  You normally only have two years to file legal action.

Sep 16, 2009 08:41 AM #21
Anonymous
Cesar C

Hi, I just recently purchased my first prperty in Perris CA, (Villages of Avalon). YES I have to pay mello roos and YES I would like to do something about this rip off tax fee that is so unfair because is not even tax deductible, but if theres a way spread the word my friends. Does any one have any suggestions on how to start some kind of boycott movement against mello roos?  

Jan 05, 2010 09:11 PM #22
Rainer
16,656
Bob Crain
Crain Realty - North County Luxury Homes - San Marcos, CA
San Diego County Real Estate Broker

Where to start...

While I believe that our 1% tax basis is plenty of money to pay for everything that our government "SHOULD" be paying for, this tax was enacted because new buyers don't Want to pay the True Costs that these "MEGA Developments" have on existing communities UP FRONT.

True Costs?

What do I mean by true costs?  These new developments need new roads, schools, fire stations, increased numbers of Police...  These increased costs are only associated with the increased number of people, so who should bear the increased costs?  The person who lived in that community for 25 years and is about to retire?  NO!  It shouldn't the people causing the problems that have to pay for fixing them?  If you have a two lane road that ends on a 500 acre farm then a developer comes in and builds 4,000 homes should the people who were living on that country road see their taxes increase to pay for all the new roads and the new school that goes in on that former farm?

In Riverside County Hundreds of Thousands of people moved out of LA, Orange, and San Diego Counties to NEW homes which were built in the late 1990's through 2000's.  NONE of these homes had the "True Costs" included in the initial price.  The development costs were DIFFERED over future years (up to 40 years) so the developer could hold down the up-front cost of the home and make them more affordable for the initial buyer, but those costs were passed on for years to come in the form of the MELLO ROOS tax.  (This is property tax so should be included with your regular property tax on your Federal and State Tax return - check with your tax advisor for more details.)

How can you aviod paying Mello Roos?  There are a couple of solutions:

1. HIRE A BUYERS AGENT! - Don't buy a home in an area which has existing Mello Roos without checking with your buyers agent on if that property has Mello Roos.  One of the Jobs your Buyers agent should do for you is check this out BEFORE you purchase.  If you don't hire a BUYERS AGENT then SHAME ON YOU!  The listing agent is working for the seller, do you think they will tell you about something that might cause you to not buy his listing?  NOTE: the Transfer disclosure statement AND several other disclosures (Property I.D.'s NHDS) will state in writting what taxes you are projected to be paying.  Buyers sign that they have seen and read these documents.

2. CHECK WITH THE COUNTY OR CITY - If you are one of those buyers who thinks that they can purchase a home without hiring an agent then don't bitch and moan when you have surprises.  You can call the city or county and find out what the tax basis is for any home.

3. Find out what the PAY-OFF AMOUNT IS! - Some if not all cities will allow owners to "Pay Off" the Mello Roos tax.  Your Buyers agent can call the county or city find out what that amount is and then ask the seller if they will pay it off as a condition of the purchase.  That's right, this tax may be payed off early.

Feb 16, 2010 10:52 AM #25
Anonymous
valerie

thank you for all the comments and info...very helpful

Oct 20, 2010 02:57 PM #26
Anonymous
L. Bonnigson

The real issue here is local, county, state, and federal government inefficiency and corruption and the lack of financial transparency that allows them to waste away taxpayer money.  I call it the "Mini Bell" syndrome in honor of the city fathers of Bell California who have been in the news lately for lining their pockets to the tune of millions of dollars each year at tax payers expense.  

If local government was run efficiently and without corruption, a 1% tax burden would be sufficient to pay for new city and county services.  That five mile road leading to the 500 acre plot upon which 4000 homes were built along with other necessary infrastructure could easily be financed by 4,000 new property owners paying 1% property taxes each year on homes selling for $250,000 each. 

4,000 new property owners paying $2500/year in taxes is ten million dollars per year.  Float a bond to build the new facilities including roads and schools etc. and insist that the construction be efficient and the bidding honest and competitive.  That's all it takes.  But unfortunately, that's not what we get.  Efficiency and honesty are not part of what our city leaders and public works provide.  Have you ever driven by a Cal-Trans road crew working on a roadway?  For every worker handling a shovel, there are three others standing around watching?  Not likely.  And that's the way it goes with all public works.  What's the answer?  City fathers figuring out ways to beat Prop 13.  What's the result? Mello Roos.

Nov 03, 2010 07:37 AM #27
Anonymous
Roberta

I bought a home from Lennar in Beaumont Ca, I asked the seller (sales person) if there were any HOA fees, and special taxes... Only HOA and a chairtable fundation of 1.00 when the house is sold again. I purchased the home and when my taxes came in I had CFD fees (Mello-Roos). My lender than tells me that my mortgage payment would increase, and I stated I didn't agree to increasing my loan.. I agred to 1,995 a month because I knew that's what I could afford. Now my payment is 2,382.00 for now because my property assessment dropped. I am a single parent of a young adult who attends college. I am a teacher, that get paid less now then 8 years ago due to budget cuts. I feel like walking away from my home and being a renter because their is no reason to pay for Mello-Roos fees that I can't even deduct from my taxes. I did the math, with the interest, fees and taxes for this house I could have put the 22,000 in my savings. Here I thought that buying a home was a good thing. I need advice if I should just let my credit it screwed and let the house go.

Feb 17, 2011 02:26 PM #28
Anonymous
Robert

Mello Roo's should be illegal!  How many differant venues do you pay taxes for schools and police and fire, MANY!

When police and fire officers are getting pensiions equating to 100K a year someone has to pay for that, right :)

Mar 22, 2011 11:19 PM #29
Anonymous
Kenneth Gordon

I read all of your comments very well and I find myself in the same situation.I can't believe the listing agent did not tell me of all these taxes.I understand why they exist but I'm outraged how much they are.The housing market is horrible and now I have to deal with this.It is so unfair and pathetic that thing are so hard we all have to put up with more b_____!!!!!Once again I understand these taxes but is thier anyway to get them lowered or paid off.I need real big time help.Anyone please talk to me!!!!!!

 

Apr 24, 2011 08:34 AM #30
Rainmaker
530,739
Jim Lee
RE/MAX By The Bay - Portsmouth, NH
Portsmouth NH Realtor, Portsmouth, NH

Kenneth, I read above that some cities will let you pay yours off. Have you checked with anyone to see?

Apr 24, 2011 10:13 AM #31
Anonymous
Kenneth

  I haven't done anything yet.Since it is Easter it is hard to get in touch with anyone.Thank you so much in getting to me.I still can't believe the lack of integrity in the real estate business or else I,m big time too out of touch with all these new thing in real estate.Just to let everyone and yourself know I found out by a loan agent not my broker.I truly want this property but it would be like paying for a 750,000 house as far as taxes go.Thank you so much in taking a interest in my situation.

Apr 24, 2011 10:25 AM #32
Anonymous
Kenneth Gordon

well today is going to be a very interesting day.I am trying to call my tax man to see if I can use my IRAto finance my own loan.I am also going to try to make a deal with these mello roos and maybe with Gods help they will let me pay them off or reduce them.I truly at the end of my mind if you can understand that.I need and I am looking forward if anyone can give me advice.I'll be honest I have no idea what I'm doing.Please respond with me anyone.I like to thank a realtor who name escape me for giving me advise.Help!!!!!!!!!!!

 

             Yours forever,Kenny

Apr 25, 2011 10:46 AM #33
Anonymous
Kenneth

 Well I tried to buy some of my mello roos and found out it would cost me for just two of them 96,000 dollars.So that certainly is out of the question.I've written to elected officials and they all seem to say the same thing.The problem is that home have dropped so much that the normal tax does not even come close in covering expenses.I afraid we are going to have to just live with them or rent.I wish they would at least let us write them off like normal taxes.It seemd to me that this is another outgrowth of our ailing economy.At this point I'll do my best and live with them God willing.Dear lord please save our country.I like to say to all of you that this blog site kicks ass!!!At least I have people and realtors that understand and believe me I feel for all of you.

           I have just given up,Kenny

 

 

Apr 27, 2011 09:27 AM #34
Rainmaker
530,739
Jim Lee
RE/MAX By The Bay - Portsmouth, NH
Portsmouth NH Realtor, Portsmouth, NH

Goog grief Kenny, that price is outrageous. It sounds like yor're buying a whole classroom by yourself.

I feel for you buddy, hang in there. I'm thinking a new bunch of leaders in Washington that actually care and listen to people like you and me can make a difference. We have to do our part and elect them and not the ones that promise things they have no way deliver.

 

 

Apr 27, 2011 11:09 AM #35
Anonymous
Nicole

My husband and I just purchased a home in San Jacinto, we are paying well over $350.00 a month in Mello Roos. After speaking with our neighbors we found out that we are the only home on the block that is paying this tax. 1 owner purchased the home when they had been built in 2006, everyone else purchased aprox the same year we did. I am trying to figure out why everyone else pays $70.00 a month in property taxes and we are paying $350.00 a month. The Auditor Controllers office pushed me off and says I need to call the agency who is charging me and to look at the CFD telephone numbers to call the agency. This is not adding up to me. Can anyone shed some light on this situation? 

May 07, 2012 01:21 PM #36
Anonymous
kenneth gordon

 something haas to be done.i pay 275 a month on melloroos can someone help it is makingn hard to pay my mortgage!!!!

May 07, 2012 07:31 PM #37
Anonymous
kenneth gordon

 I wonder how much this ass-hole home builders kick backs they are getting.Someone in congress who has balls should

chalenge the son of a bitches!!!!!!!!

May 07, 2012 08:20 PM #38
Anonymous
Beaumont Resident

Beaumont, CA boasts some of the highest mello roose property taxes in all of California if not the US. The mello roos can be as high as $4,200/year on some homes (this doesn't not include your regular taxes - add that in and they are paying $7,100 on a $200k assesment and most of the areas in Beaumont increase coumpounding every year by a minimum of 2%. I would say the average homeowner who buys a home built after 2004 pays roughly $3,000/ a year in mello roos (not including regular property tax) and these mello roos costs are scheduled to increase every year by at least 2%. Most of the bonds last 30 years, but the city of Beaumont will charge a mello roose service fee ontop of the mello roos that will last 50 years. This extra mello roos fee increases with CPI aka inflation ontop of the 2% hike every year.
Here is a basic break down of the mello roos by major development.

FYI the Mello Roos out here is formally referred to as CFDs ( Communiy Facilities Districts )

BEAUMONT COMMUNITIES & THEIR RESPECTIVE MELLO-ROOS, HOA, & BASE TAX

SUNDANCE
Area 8
Real Tax Rate Range = 1.95% - 3.58%*
Estimated Number of Homes in Community: 1,900
Mello-Roos Range: $1,063 - $4,076/year (varies from CFD zone and home square footage)
Mello-Roos in this community increases by a minimum of 2% every year.
HOA: $41.50/month ($498/year)
Base Tax: 1.37%

Seneca Springs
Area #6A1
Real Tax Rate Range = 2.76% - 3.12%*
Estimated Number of Homes in Community: 950
Mello-Roos Range: $2,563 - $3,232/year (varies from CFD zone and home square footage)
Mello-Roos in this community increases by a minimum of 2% every year.
Base Tax: 1.37%

FAIRWAY CANYON
Area #19
Real Tax Rate Range = 2.73% - 3.60%*
Estimated Number of Homes in Community: 1,250
Mello-Roos Range: $2,501 - $4,110/year (varies from CFD zone and home square footage)
Mello-Roos in this community increases by a minimum of 2% every year.
HOA: $145/month ($1,740/year)
Base Tax: 1.37%

Tournament Hills
Area #16 & 17
Real Tax Rate Range = 2.26% - 3.38%*
Estimated Number of Homes in Community: 1,500
Mello-Roos Range: $1,639 - $3,714/year (varies from CFD zone and home square footage)
Mello-Roos in this community increases by a minimum of 2% every year.
HOA: $112/month
Base Tax: 1.37%

Oak Valley Greens
Area #14
Real Tax Rate Range = 2.22% - 2.38%*
Estimated Number of Homes in Community: 1,500
Mello-Roos Range: $1,567 - $1,867/year (varies from CFD zone and home square footage)
Mello-Roos in this community increases by a minimum of 2% every year.
HOA: NA
Base Tax: 1.37%

K’Hovnanian (55+)
Area #7
Real Tax Rate Range = 1.72% - 3.55%*
Estimated Number of Homes in Community: 1,923
Mello-Roos Range: $633 - $4,021/year (varies from CFD zone and home square footage)
Mello-Roos in this community increases by a minimum of 2% every year.
HOA: $215 - $298/month
Base Tax: 1.37%

Solera (55+)
Area #14A
Real Tax Rate Range = 2.22% - 2.38%*
Estimated Number of Homes in Community: 1,250
Mello-Roos Range: $1,567 – $1,867/year (varies from home square footage)
HOA: $177/month
Base Tax: 1.37%

Three Rings Ranch
Area #3
Real Tax Rate Range = 1.96%*
Estimated Number of Homes in Community: 550
Mello-Roos Range: $1,081/year (varies from CFD zone and home square footage)
Mello-Roos in this community increases by a minimum of 2% every year.
HOA: None
Base Tax: 1.37%

Cougar Ranch Area
Area #9-13 & 23
Real Tax Rate Range = 1.56% - 2.34%*
Estimated Number of Homes in Community: 750
Mello-Roos Range: $337 – $1,787/year (varies from CFD zone and home square footage)
Mello-Roos in this community increases by a minimum of 2% every year.
HOA: None
Base Tax: 1.37%

Brookside & Deodar Dr. / Morgan Ave. Area
Area #18
Real Tax Rate Range = 2.57% - 2.84%*
Estimated Number of Homes in Community: 195
Mello-Roos Range: $2,215 – $2,703/year (varies from CFD zone and home square footage)
Mello-Roos in this community increases by a minimum of 2% every year.
Base Tax: 1.37%

May 10, 2012 08:04 AM #39
Anonymous
kenneth

so I suppose you think this is right.You must be a builder.

May 11, 2012 04:32 AM #40
Post a Comment
Spam prevention
Show All Comments
Rainer
16,656

Bob Crain

San Diego County Real Estate Broker
Ask me a question
*
*
*
Spam prevention

Additional Information