Buyers Beware: Buying Real Estate Subject to Unpaid IRS Taxes

When purchasing real estate, it is important to be diligent in whether the seller owes unpaid taxes to the IRS.  In certain situations, the IRS can collect prior owner’s taxes from you the buyer of the real estate, even though the seller incurred those taxes.  A recent United States District Court, District of Nevada demonstrates this issue.

In the case of Shirehampton Drive Trust v. JP Morgan Chase Bank, No. 2:16-cv-02276 (D. Nev. 2019), the owner obtained a mortgage to purchase real estate property.  The owner later fell behind and failed to pay their monthly homeowner’s association (HOA) dues, and the HOA recorded a notice of delinquent assessment lien on the property.  The HOA then foreclosed on the property.  Shirehampton Drive Trust (Shirehampton), the plaintiff, purchased the property from the foreclosure sale and sued JP Morgan Chase Bank (the bank) to quiet title to the real property, and the bank filed a counter claim on the same grounds.  The IRS became involved as well and removed the case to Federal Court, filing a claim of its own on the grounds that the previous owner had outstanding unpaid Federal taxes.

Federal IRS Tax Liens arise by an operation of law when taxes are assessed.  Once the IRS records the tax debt, it has an interest in the taxpayer’s property, which generally includes real estate.  The IRS lien is generally made in the local county records and must be recorded to generally be valid.

The issue hung on which lien was superior, the IRS or the HOA lien.  Generally, the “first in time, first in right” rule applies, looking to the timing of when the liens were filed.  Shirehampton argued that the HOA lien was superior and thus they purchased the lien clear of the IRS Federal Tax Lien.  The IRS argued the HOA lien wasn’t perfected before the Federal Tax Lien, as under Nevada state law, the HOA lien would not be perfected until after notice was sent to the owner of the delinquent assessment.  The US District Court for the State of Nevada ruled for the IRS in that the IRS lien filed on May 1, 2009 was before the date the delinquent assessment was sent to the prior owner on July 24, 2009, even though the owner became delinquent of the HOA dues on March 1, 2009.  As notice of the lien was not perfected in being sent to the previous property owner, the IRS’ lien was superior.  Thus, Shirehampton purchased the property subject to the IRS’ lien and had to pay those unpaid taxes of the previous owner.

When dealing with tax issues and liens when buying property it is important to consult a tax attorney that can help you understand the consequences of liens encumbering the property, and not end up paying the unpaid taxes of the previous owner!

VW Contributor: Ryan Coufal
© 2019 Vandenack Weaver LLC
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Business Entities as Parties to Real Estate Transactions: Who Has Authority?

Business entities buy and sell real estate on a regular basis. A successful transaction hinges, in part, on the proper parties executing the requisite documents. Because failing to correctly identify the parties and obtain proper signatures can be fatal to any real estate transaction, understanding who has authority to sign, on behalf of the entity, is imperative.

Four types of business entities are commonly involved in real estate transactions: (1) general partnerships; (2) limited partnerships; (3) limited liability companies; and (4) corporations.

A general partnership is an association of two or more persons to carry on as co-owners a business for profit. Formation of a partnership does not require a filing with the State, nor does it require a partnership agreement. As such, any conveyancing documents must clearly identify whether partnership property, versus non-partnership property, is being sold. In general, all partners should sign the conveyancing document to sell partnership property. However, a Statement of Authority may be voluntarily filed with the Secretary of State, granting specific partner(s) express authority to solely dispose of partnership property. Unlike the general partnership, a limited partnership (“LP”) is registered with the Secretary of State and is comprised of one or more general partners and one or more limited partners. Like the general partnership, a limited partnership may be governed by a partnership agreement. To convey real property, a deed must be executed by all general partners, unless a duly executed and authorized partnership agreement or Statement of Authority provides otherwise.

A limited liability company (“LLC”) is either member-managed or manager-managed and is created by filing a Certificate of Organization with the Secretary of State. The entity is governed by an operating agreement, which is not filed. Unless the operating agreement dictates otherwise, consent is typically required by all managers (if manager-managed) or members (if member-managed) to transfer real property outside the ordinary course of business. A duly executed and authorized Statement of Authority can be filed with the Secretary of State to supersede the signing authority as designated in the operating agreement. As such, be sure to confirm that the Statement of Authority is executed by all members or managers, depending on the LLC management structure.

A corporation is a legal entity that is owned by shareholders and operated by the Board of Directors. Articles of Incorporation must be filed with the Secretary of State to create a corporation. The corporation’s affairs are governed by its bylaws. If the corporate president does not have authority to transfer real estate, corporate disposition of property is generally a two-step process. The Board of Directors, as dictated by the bylaws, must consent to the transaction, and upon consent, the Board must pass a resolution that authorizes the transaction and designates the authorized signatory.

Early review of the relevant entity documents is key, if not crucial, to ensuring the proper parties are named and have executing authority in any real estate transaction. This simple, but fundamental, step can certainly facilitate not only a timely and efficient real estate closing, but also a successful transaction.

© 2018 Vandenack Weaver LLC
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Increasing Risk of Wire Fraud in Real Estate Transactions

On a national level, and with growing prevalence in Omaha, Nebraska, real estate professionals are reporting increased instances of wire fraud scams in real estate transactions. The scams are hitting both residential and commercial real estate transactions, but are becoming especially pernicious in commercial real estate, resulting in millions of dollars wired to the wrong account.


The scams, generally, result from an email account or a real estate broker database being hacked, where the scammer learns about the transaction, and then sends last minute fraudulent wire transfer instructions that look real because of the details. Often, the fraudulent instructions will include a middle-man, such as a real estate professional, attorney, or title company receiving the wire instructions and forwarding those instructions to the financial institution. By using the intervening party, the fraudulent instructions look genuine to the financial institution.


For all individuals and entities involved in real estate transactions, the safest approach is using secure email services, especially when sending wire instructions. However, if secure email services are not used, warning signs include last minute changes to the wire instruction, erroneous email addresses, or a change to an overseas financial institution. If any of these red flags arise, the wire instructions should be verified with the originating party.

© 2017 Vandenack Weaver LLC
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Updates Made to Nebraska Homestead Exemption Information Guide

By Joshua A. Diveley.

The Nebraska Department of Revenue (NDOR) has updated its information guide regarding the Nebraska property tax homestead exemption. The homestead exemption provides property tax relief to certain homeowners by exempting from tax all or a portion of the taxable value of the taxpayer’s residence. The homestead exemption is available to persons over the age of 65, qualified disabled individuals and qualified disabled veterans and their widow(er)s. Specifically, revisions were made in the disabled veterans category to remove the requirement, effective for periods prior to January 1, 2015, that a veteran had to serve during a recognized war of the United States to be an eligible disabled veteran. Effective January 1, 2015, military service during peace is sufficient to qualify as a disabled veteran.

The homestead exemption form must be filed with the county assessor by June 30, 2015.

The updated homestead exemption information guide may be viewed on the NDOR’s website at: Release, Nebraska Department of Revenue, February 9, 2015

© 2015 Houghton Vandenack Williams

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What Is Title Insurance?

Title insurance is something that someone purchasing real estate or lending money on real estate purchases to make sure that they are really getting what they think they are getting. What title insurance does is tell you the title history of your property, the loans that have been taken out against the property, and any liens against the property. All of that is going to be put forth in that title insurance policy and the title insurance company is going to say that if there is anything else that comes up, we’ll protect you against it. So title insurance is there to make sure that when you buy a property, you know exactly what you are getting.

© 2014 Parsonage Vandenack Williams LLC

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What Are Some Common Risks Involved in a Commercial Property Lease?

When you are renting property for your business you need to start out by asking who is paying for it to be improved. Who’s going to cover that cost so that I’m ready to open my door? Then you have to think about who are your neighbors. If you have a restaurant next to you, you might need to give consideration to what happens if flooding occurs and who is going to be responsible for odors that might come through. You also have to look at parking. Is there sufficient parking for my business? How much parking do my neighbors use? Is one of my neighbors the type of tenant that every Monday night for Monday Night Football they are going to be packed, so I better not plan on having customers show up?

There are a lot of things you need to think about when you are looking at leasing commercial property, but you really have to consider if my business is going to operate here, can it be successful. If the answer to that is yes, everything else can be resolved through good due diligence.

© 2014 Parsonage Vandenack Williams LLC

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What Are Some Common Risks Involved in a Commercial Real Estate Transaction?

In a commercial real estate transaction there are risks associated with making sure the buyer can afford to pay you, that’s usually the first thing the seller wants to figure out. From a buyer’s standpoint, you want to look at what kind of due diligence do you need to do. Do you need to worry about zoning regulations? Are the environmental hazards that have been on this property? Did there used to be a gas station? What are the title issues? Are there any easements running through it? If you are redeveloping the property you may be putting a new building up. You need to make sure that you have the right to put it where you really want to on that piece of property.

Every transaction is different and every transaction has its hot points. Sellers want to make sure they are getting paid and they know when they are going to close and buyers want to make sure they are really going to be able to use the property the way they want to once they close.

© 2014 Parsonage Vandenack Williams LLC

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