Torii

All About Mello-Roos Tax

Mello-Me, Mello-Yous, Mello-They, Mello-Roos! All kidding aside, if you’re a first-time home buyer in Los Angeles County, you’ve probably heard of (or soon will hear of!) Mello-Roos Tax.

What is Mello-Roos? (Commonly also referred to as “Melarose”)

Mello-Roos is specific type of district found in California. It is an ad hoc California tax district created to finance an infrastructure project. A Mello-Roos Community Facilities District (CFD) may be created by a city, county, or school district. Mello-Roos allows a local county or city government or school district to sell bonds in order to finance a specific project or service, like street lights or maintenance of parks and trails. The bonds are multi-year bonds, and the assessment does not change over time. “For example,” says Torii’s Sales Development Representative Charles Blanchette, “If you list your house for $300,000 more than the price you paid five years ago, the assessment won’t change and the cost of Mello-Roos will be the same.”

Projects permitted under California law range from infrastructure improvements to police and fire services, schools, parks, and childcare facilities. Mello-Roos is an extra way of adding tax dollars to make improvements to an area.

mello-roos-tax

Who decides to set the Mello-Roos tax?

A district may be created only with the approval of two-thirds of voters and permits a special tax to be assessed on its residents. The state law allowing such districts was implemented in 1982 as a way for local governments to bypass the state’s 1978 cap on property tax increases. Mello-Roos is not calculated based on a property’s value. Instead, it is calculated based on the parcel size, square footage of the home, and other property characteristics.

“Homes built before the 1990s rarely have Mello-Roos, but any subdivision created in the 2000s most likely will,” says Torii agent Annabelle Brownell, who was born and raised in the Los Angeles area. “Think of it like a parcel tax. It’s frequently found in new construction areas, and in particular gated communities.” Those new to the Los Angeles County area might also think of it like an HOA, another form of a monthly fee set for common-use improvements.

How will I know if a property is going to have Mello-Roos or not?

Real estate agents are required to disclose if a property is in a Mello-Roos Community Facilities District, so it should be noted on the listing in the MLS. If nothing is noted, and you are looking at a newer development that will also bring a new school, police and fire services, and more, you should ask.

Do I have to pay the Mello-Roos Tax?

In short, yes, you have to pay the Mello-Roos if it is on your property. Mello-Roos is a lien attached to a property, and if it is unpaid it acts like any other lien.

If you have any questions about Mello-Roos on a specific property, one of our Los Angeles-area agents would be happy to help.

Tags:
© 2020 Torii, Inc. All Rights Reserved. MA License #422946, CA DRE #02112597