Yesterday, I found out what failing to pay attention to details in legal documents can cost.
Sarita and I bought a bunch of acres in Virginia several years ago. Most is forest; some has been cleared. We were thinking we might build a house there. In the meantime, we were going to care for it with the best methods we knew to use.
We placed the property into the Virginia Forestry tax abatement program . . . which requires a forestry care plan and regular reports concerning what we are doing toward fulfillment of the plan.
Sadly, we found we couldn’t actually accomplish what our forestry plan said we intended to accomplish. So we felt the need to move out of the program.
Save Taxes, But Watch for the Gotchas!
Meanwhile, it was empty land. So . . . for tax reasons (we could save a few thousand dollars a year), we decided to enter Virginia’s Open-Space Use program and signed an agreement.
I read the relevant language in the agreement. It said that, though it would control the property for a period of 10 years, we were perfectly free to sell the property, and, while it would control the new owner’s options as well, if we wanted to get out of the restrictions, we could. All we needed to do is pay back the taxes we would have owed had we not gotten into the program in the first place.
In fact, here’s the relevant language from the agreement that we signed, just so you can see what I’m talking about:
9. The provisions of this agreement shall run with the land and be binding upon the parties, their successors, assigns, personal representatives, and heirs.
11. This agreement may be terminated in the manner provided in § 15.2-4314 of the Code of Virginia for withdrawal of land from an agricultural, a forestal or an agricultural and forestal district.
12. Upon termination of this agreement, the Property shall thereafter be assessed and taxed at its fair market value, regardless of its actual use, unless the County determines otherwise in accordance with applicable law.
And (the most relevant portion),
14. NOTICE: WHEN THE OPEN-SPACE USE OR USES BY WHICH THE PROPERTY QUALIFIED FOR ASSESSMENT AND TAXATION ON THE BASIS OF USE CHANGES TO A NONQUALIFYING USE OR USES, OR WHEN THE ZONING FOR THE PROPERTY CHANGES TO A MORE INTENSIVE USE AT THE REQUEST OF THE OWNERS, THE PROPERTY, OR SUCH PORTION OF THE PROPERTY WHICH NO LONGER QUALIFIES, SHALL BE SUBJECT TO ROLL-BACK TAXES IN ACCORDANCE WITH § 58.1-3237 OF THE CODE OF VIRGINIA. THE OWNERS SHALL BE SUBJECT TO ALL OF THE OBLIGATIONS AND LIABILITIES OF SAID CODE SECTION.
That was in December of 2015.
What happens when you don’t pay attention
In March of 2016, we realized we really didn’t want the property anymore. There was no way we would ever move to Virginia and build a house on that property.
So we signed a contract with a realty company and put it on the market.
Just a couple of weeks ago, the realtor found a buyer. The guy was really interested. He came and visited the property. He was all set to put a bid in on it.
But he did some research and discovered we had an Open-Space Use Agreement.
“I can’t buy it,” he said.
“No! Of course you can buy it!,” I said. “Why not?”
“Because I want to build a house on the property.”
“No problem! We’ll be happy to pay the back taxes and you’ll be free to proceed. . . .”
The realtor told me I’d better check with the county. And the upshot: I should have read § 15.2-4314 of the Code of Virginia and talked with the county in detail about what that section means.
When I spoke with the man at the county who oversees the Open Space program, he said,
As far as Albemarle County is concerned, “§ 15.2-4314 of the Code of Virginia” as mentioned in Section 11 of the OSUA means what you can find in Albemarle County Code Section 3-205(C)(2).
And the controlling part of that section is subparagraph (c): “The proposed land use [has to be] consistent with the public interest of the county in that it promotes the health, safety or general welfare of the county, rather than only the proprietary interest of the owner.”
So the only buyer who is likely to be interested in the property is someone who wants it for hunting . . . and . . . maybe in another 8 years or so, someone who would like to consider building a house on it shortly after the OSUA ends on 12/7/2025. . . .
Moral of the story
Read your legal documents, of course. But, more importantly, when you see a reference in a document to a particular law or code or section of some other legal document: pay attention. Don’t gloss over it. Look it up. Read that text as well. There’s a reason that reference is there. It’s part of the document you are reading.
And if you aren’t absolutely sure what it says, you’d best do your homework. Find out what it says. Because what you don’t know can hurt you. That laziness on your part could come back and bite you . . . as § 15.2-4314 of the Code of Virginia has come back to bite Sarita and me.
Oh, yes! Sarita and I will save a few thousand dollars in taxes over the next eight years . . . but why are we paying any taxes on that property? If we hadn’t signed that agreement, we would no longer own the property on which we will be stuck paying taxes! If I had paid attention to the details, we wouldn’t have signed the agreement and, instead, we would have been turning that property into cash right now.
Lesson learned? I hope so!