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What is annexation and how does it impact your closing?

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Whether you're a homebuyer, a real estate agent or a settlement agent,  you want to make sure a property is clear of all liens or claims for a new buyer. Annexation is something to be aware of when searching a property for  unrecorded municipal liens

 

What is annexation?

Annexation is the addition or incorporation of a territory into a county or city.Property annexation is a fairly common practice, especially in states where there is constant population growth like Florida, California, New York, and Texas. Incorporated municipalities will consider annexing private and commercial properties to maintain the fiscal and physical growth of the city.

This can be great for a city because expanding their territory means an increase in their ad valorem tax base, utility taxes, and miscellaneous revenue sources such as fines, fees, and utility connection charges. However, this can present some headache for a home buyer, the real estate agent, and the title agent if they are unaware that the property is annexed.

In Florida, annexations are governed by Chapter 171 of the state statutes. In Texas, The Municipal Annexation Act of 1963, now found in Chapter 43 of the Texas Local Government Code, has been amended so many times to address specific situations that it's difficult to understand if and when a municipality has authority to annex properties. New York's General Municipal Law also lists contingencies of how a village, town, city, or county may go about annexing properties from neighboring municipalities. Every state will have unique qualifications for the annexation process.

The annexation process presents issues and advantages for the county, city, and property owners. While annexation may benefit current property owners by providing more centralized services and voting rights, for a potential home buyer, the transfer of a home's jurisdiction from county to city may result in unresolved fines, fees, and utility charges with the county as well as future special assessments for new services from the city. Annexations may not be complicated, but they are certainly tedious. It's easy to miss information from a utility provider if you aren't paying close attention to which jurisdictions a property occupies. 

 

How do you know if a property is annexed?

  1. Confirm if the home you or your clients fall in love with is an annexed property. Many counties provide this information online. For instance, Broward County offers an interactive annexation history map on their county website. Simply search the address in question. If the property address falls within a color-coded area, it has been annexed by the city.
  2. Request all necessary an unrecorded municipal lien search. If the property has been annexed, make sure a municipal lien search is performed to obtain both county and city information. You are probably aware that code liens, expired permits with fees and unpaid utilities may be lurking out of sight from a typical title search in the form of unrecorded municipal liens. For properties that have been annexed, this means potential double trouble from both the county and the city. In Pinellas County, properties within the jurisdiction of the quiet beach town of Madeira Beach, permits were issued by the county until 2010. If permit information is not obtained from both the county and city, open and expired permits with their prospective fees could potentially be missed.
  3. Obtain Special Assessments from both the city and the county when applicable. In some cases, additional services may be provided to the property via special assessments from the city that were not provided by the county. Often, this information must be requested from a different department within the county and city.

Tired of gathering all the municipal information for your closings? We can help! Download our easy-to-read sample report.

 

How does property annexation impact a homebuyer or new homeowner?

In theory, annexation should streamline and centralize the services provided to property owners, but in some cases, duplication of water and wastewater services occur. City and county lines can run alongside one another. As a result, different services may be maintained and billed by two different municipalities where additional fees could apply to the annexed property.

If you are a title agent, be sure to add annexation research to your real estate due diligence checklist. 

If you are worried about missing any of these important details that could lead to significant fees and fines for you or your client, seek out the help of a reputable lien search company that regularly performs these searches.

 

PropLogix Free Lien Search Sample Report Download

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About Author

Amanda Farrell
Amanda Farrell

Amanda Farrell is a digital media strategist at PropLogix. She enjoys being a part of a team that gives peace of mind for consumers while making one of the biggest purchases of their lives. She lives in Sarasota with her bunny, Buster, and enjoys painting, playing guitar and mandolin, and yoga.

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