Browse Proptionary encyclopedia

Build your real estate vocabulary to be able to communicate and invest more effectively and professionally.

Tax Lien

DEFINITION

In some states, if an owner fails to pay their property taxes, a tax lien can be issued on the property in question. However, if the property owner is able to pay back the money they owe within a preset period of time, they are issued with a certificate of redemption. It is very       common for local tax authorities to auction off tax liens to private investors who can then seek repayment of delinquent taxes plus interest. If the taxes aren’t paid off within the period of redemption, the owner of the lien has the                right to foreclose upon the property. If you have paid off your delinquent taxes, it is important to claim a certificate as soon as possible because it will allow you to refute any claims on your property made by investors who may have purchased the lien if it was placed up for auction.

EXPLANATION

Each state has it’s own period of redemption, which can vary from 60 days (in Delaware) to three years (in South Dakota.) In most states, certificates of redemption can only be given within this period, which generally extends from the date of the lien’s sale. [http://www.foreclosurelaw.org/]

Tax Lien vs Tax Deed:

Not all states allow redemption after a foreclosure sale. In 19 states local tax authorities use tax         deeds, which are legal documents that grant ownership to the holder should the property owner fail to pay taxes due on the property. In a tax deed sale, the property itself is sold, rather than a lien upon the property, and the buyer can choose to foreclose immediately.

State by State:

California: Deed — No period of redemption. Sale can only take place after a property has been in default for five years.

Colorado: Lien — Three year period of redemption.

Connecticut: Hybrid — Sixty day period of redemption.

Delaware: Hybrid — Sixty day period of redemption.

District of Columbia: Lien — Six month period of redemption.

Florida: Lien and Deed — Two year period of redemption, after which the buyer has the option to either foreclose immediately, or hold the lien for a maximum of 7 years.

Georgia: Hybrid: One year period of redemption.

Hawaii: Lien — One year period of redemption.

Idaho: Deed — No period of redemption.

Illinois: Lien — Two year period of redemption.

Indiana: Lien — One year period of redemption.

Iowa: Lien — Two year period of redemption.

Kansas: Deed — No period of redemption.

Kentucky: Lien — One year period of redemption.

Louisiana: Hybrid — Three year period of redemption.

Maine: Deed — No period of redemption.

Massachusetts: Hybrid — Six month period of redemption.

Maryland: Lien — Six month period of redemption.

Mississippi: Lien — Two year period of redemption.

Minnesota: Deed — No period of redemption.

Michigan: Deed — No period of redemption. Sale can only take place after a property has been in default for three years.

Missouri: Lien — Missouri divides properties into those with one year, two years, three years, and four years of delinquent taxes. For one, two, and three year delinquent tax liens are sold with a two year period of redemption. Four year delinquent tax liens are sold with no period of redemption

Montana: Lien — No period of redemption for properties under 40 acres, one year period of redemption for larger properties.

Nebraska: Lien: No period of redemption.

Nevada: Varies by county: One period of redemption, but only for judicial foreclosures, or those decided in court.

New Hampshire: Hybrid — Two year right of redemption, but only in certain counties.

New Mexico: Deed — No period of redemption.

New York: Lien and Deed: No period of redemption.

New Jersey: Lien — Two year period of redemption.

North Carolina: Deed — No period of redemption.

North Dakota: Deed — No period of redemption.

Ohio: Lien and Deed — Period of redemption depends on how long it takes the court to confirm a property’s foreclosure sale. The period can be as long as 90 days or as short as two.

Oregon: Deed — No period of redemption.

Oklahoma: Deed — No period of redemption. Sale can only take place after a property has been in default for three years.

Pennsylvania: Hybrid — Two year period of redemption.

Rhode Island: Hybrid — One year period of redemption.

South Carolina: Lien: — One year period of redemption.

South Dakota: Lien — Three year period of redemption.

Texas: Hybrid — Two year period of redemption for primary residences, six months for other properties.

Tennessee: Hybrid — Two year period of redemption.

Utah: Deed — No period of redemption.

Vermont: Hybrid — One year period of redemption.

Virginia: Deed — No period of redemption.

Washington: Deed — No period of redemption.

West Virginia: Lien — Eighteen month period of redemption.

Wisconsin: Deed — No period of redemption.

[quiz-new]