What should first-time buyers know about Jeopardy Assessment of Property Tax?

A Jeopardy Assessment of Property Tax is an accelerated tax assessment issued by a tax authority when there is a credible risk that a property owner may transfer, conceal, or otherwise place their assets beyond the reach of the government before a standard tax assessment can be completed and enforced. It allows the authority to demand immediate payment.

What First-Time Buyers Need to Know

• A jeopardy assessment creates an immediate and enforceable tax lien on the property without the normal assessment process.
• Properties subject to jeopardy assessments cannot be freely transferred until the tax liability is fully resolved.
• Buyers should conduct thorough tax lien searches as part of title due diligence to identify any jeopardy assessments.
• Purchasing a property with an undisclosed jeopardy assessment can result in the buyer inheriting the tax liability.

How Jeopardy Assessments Are Triggered

• The tax authority has evidence that the property owner is planning to sell or transfer assets to avoid tax payment.
• Business failure or insolvency creates imminent risk that tax debts will become uncollectible.
• Suspected fraud or deliberate misrepresentation in tax filings triggers urgent assessment and collection action.
• Unpaid estate taxes where the estate is being distributed without settling outstanding government obligations.

Buyer Protections Against Jeopardy Assessment Risk

• Always conduct a comprehensive tax search through the relevant tax authority before settlement.
• Ensure the title insurance policy covers undiscovered tax liens and jeopardy assessments.
• Require the seller to provide written confirmation of no outstanding tax obligations as a contract condition.
• Settlement agents should conduct final tax searches immediately before settlement to capture any last-minute assessments.

Jeopardy Assessment of Property Tax is a rare but serious risk that first-time buyers must guard against through thorough title searches and appropriate contract protections. Working with experienced conveyancers and settlement agents who conduct comprehensive tax searches provides effective protection against this risk.