Tax Deed (sale)

Disclaimer:  We are quite knowledgeable concerning these various tax strategies and the laws relating to them …and use them frequently in our various activities. However, we do not practice law and urge you to consult with your own legal advisers before taking any action relating to our observations or recommendations!

(From Wikipedia, the free encyclopedia)

A tax sale refers to property (usually real property) being sold by a taxing authority or the court to recover delinquent taxes. Typically these are property taxes, but other entities like utilities sometimes hold the power to take property for unpaid debts.

The taxing jurisdiction can be any level of government which can assess and collect property taxes or other governmental debt, such as counties (parishes, in the case of Louisiana), cities, townships (in New England and other jurisdictions), and school districts (in places where they are independent of other governmental jurisdictions, such as in Texas).

 

General: State law offers the governmental entity a method of collecting its tax without simply having to “ding” the nonpaying person or business, by (after a specified grace period, whereby the property owner can be charged interest and/or penalties as well as other costs) placing a lien on the property which, if not paid, will result in future costs, and ultimately the property being seized and sold.

The requirements to begin the foreclosure process (and to avoid it) must be strictly followed; otherwise, the property owner will lose all rights to the property (or the governmental entity will lose its right to collect the outstanding debt). Common requirements include 1) sending a letter by certified or registered mail to any and all owners of record as shown on the entity’s records, as well as to any person shown as having a lien or mortgage on the property, 2) placing a public notice in a newspaper of record, and 3) in some cases, posting notice on the property itself (such as a notice on the exterior door, or a sign if the property is unimproved).

In most places in the US, a tax lien takes priority, eclipsing other liens such as mortgages.

Once the process begins, the property owner can still avoid foreclosure, by paying the amount owed plus interest, penalties, and/or other costs or fees. The amounts can end up being quite high once the process is well under way. (NPR reported on a woman losing her home in Baltimore in May 2010 because she had missed a water payment of $360; over time her obligation multiplied to over $3,000 after penalties, interest, and other fees were added.) Even after foreclosure, in some jurisdictions the property owner can still recover the property, by paying the amounts owed within a specified time. Alternatively, the owner can file suit to have the sale set aside on grounds that the requirements were not followed (such as notice not given).