Building on Ag Exempt property (Hays: construction loan, house, construction)

[PAtoTX]

Howdy!

We are in the process of closing on a 30 acre parcel in Hays county. The property is under 1-d-1 active status. We have a fully documented wildlife management plan that was created by a land management company and has been followed accordingly for the last 7 years and updated each year. Checking with the county tax office, the property is in good standing and will only need us to re-file the paperwork, wildlife plan and document any and all work that is done this year. All is good with the 1-d-1 status.

A few questions that I have come down to building on the property. If all goes as planned we will be breaking ground by late summer on our dream home.

Once construction is done, 1 acre with the house will be reassessed at the normal tax rate, but the other 29 will remain in 1-d-1 if we follow the proper requirements. Is this correct?

We are financing 50% of the land. We are planning on using that 50% deposit as equity towards a construction loan that will include the land and building costs. Once done this will convert into a conventional mortgage. Are there any issues with the financing aspect that we should be concerned with relating to 1-d-1? The bank did not see any issues.

[Johnhw2]

I am aware of a roll back of Ag exemptions for property once in Ag use when it is built upon. The concept is 7 years of taxes at the non ag rate is due upon conversion to a different use. I know this applies to developers and corporate owners but not sure about your situation but its signifcant enough to check to be sure it does not hit you and surprise you.

[PAtoTX]

According to the Hays county tax offices, roll back is not an issue unless I would take the land out of the Ag program, which is not going to happen.

The property is actually broken into three different tax divisions. Two are in the ag program totaling 28.4 acres. The third is 2.1 acres and has been taxed at the normal rate.

The bank, the tax office, title company and several builders all agree that they see no issues, but I don't think it hurts to get as many opinions as possible before we close and start breaking ground.

[Trainwreck20]

The third is 2.1 acres and has been taxed at the normal rate.

That is a pretty normal homestead size....has anything been built on the land at all? Are you restricted to a specific 2.1 acres, or will they let you move it around?

[PAtoTX]

Looking at TOPO maps there is a home marked on the property, but there is no record we can find going back through the tax records or deeds over the years. There are no permanent structures or remnants on the property beyond and old windmill and well.

County tells me that the tax info can and will be restructured to move the homestead area to where we need it.

[Trainwreck20]

County has almost total authority over an ag exemption, and only a bit less over wildlife exemptions. I suspect they will end up being the final authority, regardless.