Who Pays the Property Taxes on HEI Agreements?
Last updated 10/02/2025 by
Andrew LathamSummary:
In a home equity investment (HEI) or shared equity agreement, the homeowner—not the investor—is responsible for paying property taxes, insurance, and maintenance. These agreements provide cash without monthly payments, but the homeowner must maintain the home and stay current on tax obligations. Here’s what you need to know.
Home equity investments (HEIs), also called home equity agreements (HEAs) or shared equity contracts, offer homeowners a lump-sum cash payment in exchange for a share of their home’s future appreciation. These contracts don’t require monthly payments, but they do come with responsibilities.
One of the most important obligations? Property taxes. Let’s explore who pays them and why it matters.
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Who is responsible for property taxes under a HEI agreement?
The homeowner is responsible for paying property taxes under a HEI agreement—not the investor. Under nearly all current HEI and shared equity agreements, the homeowner remains responsible for:
- Property taxes
- Homeowners insurance
- General property maintenance
- Repairs and other homeownership-related costs
Investors provide capital, not property management. They do not take on these ongoing expenses. As the CFPB explains, homeowners in these agreements “assume all costs for property taxes, hazard insurance, and property maintenance.”
Why do homeowners pay property taxes—not investors?
1. Simplicity of structure
Investors prefer to keep their role passive. Taking on the burden of tax payments or property maintenance would require more oversight and complicate the agreement.
2. Legal structure of the agreement
The investor usually holds a lien or interest in the home, similar to a second mortgage. This entitles them to a share of future proceeds but doesn’t obligate them to pay ongoing homeownership expenses.
3. Risk management and incentive alignment
Requiring the homeowner to cover taxes and maintenance protects the property’s value. It also aligns the homeowner’s interest with the investor’s—both benefit from keeping the home in good condition.
What happens if the homeowner doesn’t pay property taxes?
If a homeowner fails to pay property taxes, several consequences may follow:
- Tax liens or foreclosure: Local governments can place liens on the property or initiate foreclosure for unpaid taxes.
- Default under the HEI agreement: Most contracts include clauses that allow the investor to demand repayment or increase settlement costs if obligations aren’t met.
- Damage to both parties’ interests: Unpaid taxes or poor maintenance may reduce the home’s value, harming both the homeowner and investor financially.
Some agreements allow the investor to take action—such as covering missed taxes and adding that amount to the settlement—but this varies by provider and contract.
Are there any exceptions?
In general, homeowners pay all taxes under HEI agreements. However, rare exceptions or custom contracts may shift certain responsibilities. These would need to be clearly written into the agreement.
Also, nonprofit or government-backed shared equity programs (such as affordable housing initiatives) may include different terms. Still, the homeowner is typically responsible for taxes and upkeep in those models as well.
For more on shared equity structures, and a comparison of home equity investors read this.
Frequently asked questions
Can the investor pay my property taxes?
Typically, no. Most home equity investment providers require that the homeowner continue paying property taxes throughout the life of the agreement.
Will I default on the agreement if I miss a tax payment?
Possibly. Most contracts include clauses that classify failure to pay taxes or insurance as a default, which may trigger penalties or early repayment requirements.
Are there any HEI agreements where the investor covers taxes?
This is extremely rare and not the industry standard. You would need to confirm this in the specific agreement before signing.
What happens if I sell the home before the agreement ends?
You’ll settle the agreement when you sell—this includes repaying the original investment plus the investor’s share of appreciation. Any unpaid taxes could reduce your proceeds.
Key takeaways
- Homeowners are responsible for property taxes under HEI agreements.
- Investors do not assume day-to-day ownership costs like taxes or insurance.
- Failure to pay taxes may trigger default or reduce home value.
- These terms are standard in nearly all shared equity and home equity contracts.
- Always read your specific agreement to understand your obligations.
Andrew is the Content Director for SuperMoney, a Certified Financial Planner®, and a Certified Personal Finance Counselor. He loves to geek out on financial data and translate it into actionable insights everyone can understand. His work is often cited by major publications and institutions, such as Forbes, U.S. News, Fox Business, SFGate, Realtor, Deloitte, and Business Insider.
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