Can you explain the property tax allocation after purchasing a used boat?

Founded in 1971 NO. 1205 APRIL 28 - MAY 11, 2023

WRITE TO: P.O. Box 1337 Newport Beach, CA 92659 (949) 660-6150 (800) 873-7327

QUESTION:

I bought a used sailing yacht through a California broker earlier this year. We used the California Yacht Brokers Association (CYBA) form purchase contract supplied by the broker, which called for the parties to check a box to pro-rate property taxes for the year. I have a few questions about the procedure for the tax allocation, starting with whether a buyer legally required to participate in the pro-ration? I don’t live in California and I don’t understand why I was asked to pay a share of the seller’s Orange County property taxes. Second, I have heard varying reports about the proper tax year to use for the allocation of tax. And finally, the contract did not spell out the exact amount that I would have to pay. Can you clear this up?

David Weil is the managing attorney at Weil & Associates (www.weilmaritime.com) in Seal Beach. He is certified as a Specialist in Admiralty and Maritime Law by the State Bar of California Board of Legal Specialization and a “Proctor in Admiralty” Member of the Maritime Law Association of the United States, an adjunct professor of Admiralty Law, and former legal counsel to the California Yacht Brokers Association. If you have a maritime law question for Weil, he can be contacted at 562-799-5508, through his website at www.weilmaritime.com, or via email at dweil@weilmaritime.com.

ANSWER: The allocation of personal property tax between the buyer and seller of a yacht is a common provision of most purchase contracts in California. However, like most other contractual terms, the allocation is not required by law and it may be negotiated between the parties.

Under the circumstances described in the reader’s question, the buyer may want to opt out of the allocation provision since he is not a resident of the county that assessed the tax. On the other hand, the seller may require the allocation since he will not be the owner of the boat for a part of the year for which the tax has been assessed. A well drafted purchase contract such as the form produced by the CYBA will include a provision which allows the buyer to “opt out” of the allocation, but this will ultimately depend on the negotiations between the parties.

When the parties agree to allocate the property tax assessment between them, the most logical basis for the allocation is to divide the calendar year based upon the closing date of the

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