Recent Changes to Michigan's Property Transfer Affidavit Form 2766 (March 2025)
As of March 2025, the Michigan Department of Treasury has implemented several key changes to the Property Transfer Affidavit Form (Form 2766). These updates aim to improve clarity, enhance data collection, and ensure more accurate property tax assessments following a transfer of ownership. In this article, the experienced real estate attorneys of Thompson Legal will discuss the key updates of Form 2766 and how they may impact your real estate transactions going forward.
Please note that this post is not exhaustive, and every situation is unique. In the event that you have legal questions it is advisable to speak with a licensed attorney. Contact Thompson Legal to speak with a Michigan Real Estate Attorney today.
Key Changes in the March 2025 Revision
The most notable change to Form 2766 is the increased emphasis on accurately disclosing the familial relationship between the parties involved in the property transfer. This is particularly important for determining eligibility for certain exemptions from the "uncapping" of taxable values.
Detailed Relationship Disclosure: The revised form now requires parties to certify their relationship in greater detail. This is mostly aimed at claiming exemptions such as transfers between family members, or after the expiration of a life estate interest. The form now includes more specific categories and may necessitate additional documentation to substantiate the claimed relationship.
Potential for Increased Scrutiny: With the new requirements, assessors may scrutinize transfer affidavits more closely. Property owners should be prepared to provide thorough and accurate information to avoid delays or penalties.
Why Are These Changes Important?
The Property Transfer Affidavit is a crucial document in Michigan real estate transactions. It is a required form to local assessors about ownership changes, which could trigger the "uncapping" of the property's taxable value in the year following the transfer. This uncapping adjusts the taxable value to the state equalized value (approximately 50% of the true cash value), which directly impacts property taxes. Failure to complete a Property Transfer Affidavit could result in a $200 fine.
The recent changes aim to ensure that the transition of ownership process is accurate and more transparent for tax assessors. By providing clearer instructions, more detailed information about exemptions, and additional data about financing, the Department of Treasury intends to:
Reduce errors and delays: Clearer instructions will help transferees complete the form correctly the first time.
Improve assessment accuracy: More comprehensive information will assist assessors in determining the correct taxable value.
Ensure compliance with the law: Explicitly stating the filing requirements and penalties reinforces the legal obligations of the transferee.
What is Property Tax Uncapping?
In Michigan, property taxes are based on the taxable value of a property, not necessarily its market value. The taxable value is generally capped and can only increase annually by the rate of inflation or 5%, whichever is lower, as long as there is no transfer of ownership. However, when a property is sold or transferred, this cap is removed, and the taxable value is "uncapped." This means the taxable value for the year following the transfer will be equal to the property's SEV, which is typically around 50% of the property's fair market value.
Who Needs to be Aware of These Changes?
Anyone involved in a real estate transaction in Michigan where ownership is transferred on or after March 2025 should be aware of these changes. This includes:
Homebuyers and sellers
Real estate agents and brokers
Title companies and closing agents, and
Legal professionals
Where to Obtain the Updated Form?
The updated Property Transfer Affidavit form (L-4260) is available on the official website of the Michigan Department of Treasury and can often be obtained from local city or township assessor's offices. It's crucial to use the most current version of the form to ensure compliance.
Conclusion
The March 2025 revisions to Michigan's Property Transfer Affidavit reflect an ongoing effort to streamline the property tax assessment process and ensure accurate information reporting following ownership transfers. By understanding these changes, all parties involved in real estate transactions can fulfill their obligations and contribute to a fair property tax system. It is strongly advisable to consult with an experienced real estate attorney to ensure full compliance and to understand how these changes may affect your specific situation. To schedule a consultation with an experienced real estate attorney, please Contact Thompson Legal today for a consultation.
This article is for informational purposes only. It is not intended as legal advice. In the event you would like to speak with a Real Estate Attorney, please Contact Thompson Legal at (734) 743-1646 to schedule a consultation.
