Breaching a Current Use covenant results in a penalty that applies to the entire tract that is placedunder an original covenant, even if the breach occurred on only a small portion of the tract undercovenant. The penalty paid by the original covenant holder will be an amount equal to twice theproperty tax savings incurred from the year the covenant was entered until it was breached, plusinterest.

In the event that a portion of the land under a Current Use covenant is sold to a qualifyinglandowner, who later breaks the covenant, penalties also apply to the entire tract under the originalcovenant. Under this condition, there will be a pro-rata assessment of the penalty against each of theparties of the covenant in proportion to the tax benefit enjoyed by each. This means that the originalcovenant holder will pay a fine based on the tax savings enjoyed on all of the acreage, from thebeginning of the covenant up to the time of sale of land, and of the breach. The subsequent covenantholder would pay a fine based on the tax benefits enjoyed from the time of covenant land purchase upto the time of the breach. Please be aware that the penalty plus interest constitutes a lien against theproperty.

Penalties for the Agricultural Preferential covenant are assessed as the tax benefits enjoyed duringonly the year of the breach, times a factor of:

• 5 if breached during the 1st or 2nd year
• 4 if breached during the 3rd or 4th year
• 3 if breached during the 5th or 6th year
• 2 if breached during the 7th, 8th, 9th or 10th year

The landowner in the original covenant pays the penalty.

The Board of Assessors office maintains the FMV of the property for each year of the covenant. Theyalso calculate the CUVA value for the property. The difference between the actual FMV and theCUVA value becomes an annual exemption for the taxpayer. The tax savings benefit is calculatedfrom the amount of the exemption.

The following is an example of how a penalty might be calculated if a covenant was breached in the6th year of the agreement, and the parcel is vacant with no homestead exemptions.

*Exempt amount is the difference between the FMV and the CUVA value multiplied times the assessmentlevel of 40 percent.
(195,000 - 92,000 = 103,000 X .40 = 41,200)

The penalty amount will vary from covenant to covenant due to the fact that the FMV and the CUVAvalue will be different for each parcel.

As shown above, the FMV changed between the second and third year. Thus the penalty amountincreased between the second and third year. This demonstrates the importance of keeping up withthe FMV, even though you are not being taxed on that amount.

In fact the tax amount due under Current Use for the first year would be $1,232.80. Without theCurrent Use covenant, the tax due would be $2,613.00. So as you can see this covenant can offersubstantial tax savings.

If the covenant is breached due to foreclosure or a medically demonstrated illness, and tax benefitshave been received for that year, then only the penalty amount due for the year in which you breach isdue.

Under one of these circumstances, the penalty due would be $4,728.00.

Yes, you can change among good faith production of agriculture or forestry crops provided that younotify the Muscogee County Board of Assessors in writing of the intended use change. Failure tonotify constitutes a breach of the covenant with penalties as described.

Yes. But to avoid a penalty, the buyer must continue the terms of the original covenant and enter anew continuance Current Use covenant for the land purchased. The buyer must also be someonewho is eligible to enter into an original covenant. The sign-up period for the new owner is during thenext year’s regular sign-up period, January 1 through April 1. The landowner under the originalcovenant remains in that covenant, unless all land under covenant was sold. But the original covenantholder still remains legally responsible for any penalty assessed against benefits earned before the sale.

When selling land under covenant, it may be wise to have your attorney include language with theproperty deed requiring the new owner to continue land use under provisions of the original covenant.

Department of Revenue Regulations state that when there is a change in ownership of property receiving current use assessment, the new owner must apply for a continuation of the covenant. This application must be made on or before the deadline for filing returns, which is April 1.

In the event of a divorce, the original parties to the covenant remain liable for any breach of thecovenant. Responsibility for penalties due to a covenant breach should be specified in divorce decrees,contracts, etc.

1. The part of the property so transferred (by plat and deed) is to be used for single-family residential purpose. Starting within one year of the start date for the building of the dwelling and continuing for the remainder of the covenant period, the residence is to be occupied within 24 months from the date of the start by a person who is related within the fourth degree of civil reckoning to an owner subject to the covenant. (see attached addendum for description of Degrees of Kinship)
2. The part of the property so transferred, taken together with any other part of the property so transferred to the same relative during the covenant period, does not exceed a total of five acres; and in any such case the property so transferred shall not be eligible for a covenant for bona fide current use.

If the original covenant holder dies before the Current Use or Agricultural Preferential covenant expires, the agreement is nullified, and the covenant ends without penalty, or the heirs have the option to continue the covenant without penalty.

If the property owner ends the covenant because of a foreclosure or medically documented illness, the covenant is breached. But only the tax savings incurred in that particular year will be forfeited. Under these circumstances, the property owner may not be eligible to immediately reapply.

There is no apparent time limit set by Georgia law on when you can change from an existing Agricultural Preferential Assessment covenant to a Current Use covenant. However, you can change from Preferential Assessment to Current Use, for a particular covenant, only once.

You cannot change from an existing Current Use covenant to a new Agricultural Preferential Assessment covenant except at the end of the Current Use agreement.

The Board of Assessors will send both the transferee and the transferor a notice of the Board’s intent to assess a penalty for the breach of the covenant. The notice shall be entitled Notice of Intent to Assess Penalty for Breach of a Current Use Covenant and shall set forth the following information:

• The requirements of the new owner of a property currently under a “Covenant” to apply for a continuation within 30 days of the date of postmark of the notice;
• The new owner of a property currently receiving current use assessment must continuously devote the property to an applicable bona fide qualifying use for the duration of the covenant
• The change to the assessment if the covenant is breached, and
• The amount of the penalty if breached.

No. You must sign a release of the first 10-year covenant and the exemption ends, The Board of Assessors office will send you notification that your covenant is about to expire.

You must make application for a new 10-year covenant, if you desire the exemption to continue.

If you apply for your second 10-year period, on the exact same tract, it is considered a RENEWAL COVENANT .

Not necessarily. Ten years is a long period, and many changes can occur.

Changes in ownership, changes in use and other factors may have occurred that need to be reviewed.

Also, since this type of covenant was originally placed into law in 1992, there have been changes made to the law, as well as changes to state regulations. Other changes have occurred due to court casesthat clarify the law. These changes include making it more difficult for smaller tracts to enter into these covenants, clarification of the type of income allowed (no, non-agricultural related rental income) and clarification of the definition of primary use of the property.