Mello-Roos, also known as Communities Facilities Districts, are established by local governments in California that divide cities and counties into special districts to integrate additional public funding. This designated amount that is special to each district can and is used towards infrastructure improvements, schools, parks, public buildings, police services, fire services, etc. Mello-Roos is an additional tax on a property at purchase. You will find Mello-Roos to be separate from other taxes and assessments.
San Diego County Mello-Roos link will provide you with contact information of the city/county you are interested in to find out more on the specific Mello-Roos in the designated area. To answer a few general questions and provide more understanding on Mello-Roos, keep reading below.
HOA vs. Mello-Roos: HOA (Home Owner’s Association) typically consists of types of residences where owners share a common space. Due to the sharing of common areas the collective ownership will contribute to the maintenance and upkeep of these common areas and/or facilities. Examples of common areas may be; fitness center, tennis courts, pool/spa, laundry facilities, gates around the community, security, etc. This is where HOA dues come in to play for owners of the home in that association.
Mello-Roos is a special facilities tax. This special tax is typically a bond measure used to establish several basic services in the community. The residents in these communities will pay this over an extended amount of time until the bond is paid off. This special tax is attached to the property and will be transferred to the new owner.
Who is responsible for disclosing a Mello-Roos tax? The law provides that the seller must make a good faith effort to provide the Mello-Roos information to a prospective buyer. As with so many disclosure items, sellers look to their agents to help them with this.
How much are Mello-Roos taxes? Mello-Roos can range anywhere from .5% – 1.5% of a home’s total value. Mello-Roos is assessed against the land and not based upon the value of the property. The possible increase value of the property does not affect the amount of the tax when the property is sold. Mello-Roos cannot increase by more than 2% each year.
How long do you pay for Mello-Roos? State law allows up to 40 years for the bonds to be paid off. In most cases, Mello-Roos is paid off in 20 years. Mello-Roos is usually added to the annual property tax bills. However, at the time of purchase, home buyers do have the option to pay for the Mello-Roos tax in its entirety. Keep in mind though some Mello-Roos never go away. Some fund ongoing maintenance, fire and ambulance services, school etc.. Some Mello-Roos are used periodically as in street improvements, sewage maintenance etc…
Are Mello-Roos Tax Deductible? Mello-Roos is shown on the annual property tax bill under the special assessment section. Mello-Roos is not tax deductible. The amount is very important to take into consideration when purchasing a home. Home buyers are required to sign disclosure documents indicating they’ve been informed of the special taxes/assessments on their new property.
It is important as a home buyer to be aware of the Mello-Roos tax in the city/county the buyer purchases the home in. As the tax could impose potential issues if it is high enough, making the property unaffordable to the buyer.