Tuesday, July 15, 2008

query: title insurance for PA tax lien sales

A normal title insurance policy will cover valid PA sales tax liens that are due and payable on or before the date of the issuance of the policy. A competent title insurer will carefully check for filed liens and also examine whether or not there is a risk of lien under the bulk sales act. It's the bulk sales issue where coverage may or may not be in place.

When you have an entity subject to corporate taxes in PA, you've got to now whether or not the real property is 51% or more of the asset. If that is the case, the entity is going to have to file for a bulk sales certificate. This certificate takes a long time to get because the state will pass the application through all tax offices, including sales tax and payroll tax, to make certain that there are no outstanding balances owing to the state at all before they allow the parties to dissolve the entity.

A couple of years ago we were asked to insure a commercial property, a dental office, being sold by a retiring dentist who was incorporated. His CPA was ill and had overlooked all of the normal forms needed to dissolve the corporation. This was a cash transaction and we ended up holding the seller's proceeds in an interest bearing account for several months while they filed all the paperwork and got a bulk sales certificate.

Buyers should beware when buying from a corporation of limited liability company who is not a lender in title following a foreclosure. Make certain that the title agent is asking all the right questions and is aware of the risk.

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