The following is question and answer on official auction website of St. Tammany, Louisiana.
Who is responsible for property taxes that become due after the tax title sale and during the redemptive period?
The buyer is responsible for paying the property taxes that become due on the property purchased at the tax title sale after the date the tax sale certificate is filed and throughout the redemptive period until the property is redeemed.
My Question is:
What happens if the buyer refuse to pay the subsequent tax? Will my tax title certificate become invalid?
If it will goto tax sale again, what percentage of ownership will give new buyer, while I already got 100% ownership?
There cannot be two 100% ownership on one property, right?
Can I get my investment + interest + penalty back if I refuse to pay subsequent tax?
Will the next buyer pay me [ my investment + interest + penalty ] ? If true, this refusal could be consider an Exit Strategy?
Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
5y
If you don’t pay the new taxes then yes it will eventually go back into tax sale. The new tax sale buy would eventually take your ownership away from you.
No you will not get any money back from the new tax sale buyer. ***
*** Possible exception depending on state law and court precedents, if you are due a “bid balance” from the new tax buyer you may be able to make a claim. I don’t know if that happens in your state and even if it does you may not have a valid claim since you did not pay the required subsequent taxes.
If you don’t pay the new taxes then yes it will eventually go back into tax sale. The new tax sale buy would eventually take your ownership away from you.
No you will not get any money back from the new tax sale buyer. ***
*** Possible exception depending on state law and court precedents, if you are due a “bid balance” from the new tax buyer you may be able to make a claim. I don’t know if that happens in your state and even if it does you may not have a valid claim since you did not pay the required subsequent taxes.
So, my previous investment is in danger if I don't pay the subsequent taxes. And the original owner won't get any more harm if he doesn't pay the subsequent taxes. He can still live in his delinquent tax house for 3 - 4 years, and I have to pay his taxes, and my ownership is locked at the first bidding percentage, my ownership won't increase even I paid 3 - 4 years taxes in future. If someone bid at 1% ownership, For every 4 years, the original owner could only lost 1% value from his property. Buy back 1% ownership from tax lien invester every 4 years. Pay 1% for every 4 years, it's 0.25% per year, it is even lower than the state's property tax.
Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
5y
@Bingji Wang yes your pervious investment is in danger but there is not much you can do about it. Buying only 30% of a house in tax sale is a very high risk investment. Paying ALL the new taxes to protect only 30% ownership doesn't sound like a good investment either.
Now I don't know your states specific tax sale details but I presume any new lien/deed sale wipes out any previous interest if he bids 100%. If someone else bid 50% for example, I would expect that you and the previous owner would split the remaining 50%, 70/30. So if a new bidder bid 50% then you would wind up with a 15% interest instead of your current 30%. That assumption is based on logic, but laws aren't always logical or fair.
Based on that your best bet is to bid 100% in the new sale. or at least significantly more than the 30% you have now. Based on the math above if you bought the new lien/deed at 50% you would then own 65% the new 50% plus the 15% left on your old certificate.
Now I don't know the value of the house. This may still be worthwhile. It is conceivable that you could do a partition lawsuit and force a sale to split the proceeds (30-70). If the property is very valuable it may be worth the expense and trouble. Also if it simply sells at a market price in a normal sale transaction then you eventually get paid from the proceeds. But if that doesn't happen for many years and you are paying the taxes in the mean time, again they may not be worth it.
Keep in mind all my responses above is all of my posts are based on logic and my general knowledge of tax sale. It is not legal advice for your particular state or situation.
Accountant · Slidell, LA · Member since 2019 · 382 posts · 272 votes
5y
@Bingji Wang I'm pretty sure that you will be paid for your tax certificate, plus penalties and interest due, if the property owner pays all the back taxes.
Investor · Covington, LA · Member since 2012 · 517 posts · 317 votes
5y
I purchase a good bit from St Tammany Parish but everything I mention below is true for the entire state of Louisiana. I'll try my best to answer each of your questions:
1. If you are the buyer you do NOT have to pay the following years taxes. In St. Tammany the tax sale is usually held in July for the previous years taxes. In December they will send you a tax bill for the year that is ending. If you do not pay the tax bill then the taxes will go back to the next tax sale. Louisiana is a 3 year redemption state. So if you do not pay and someone else gets the property at the next year's tax sale, you then have 3 years to redeem the property before you lose your ability to do so.
Two scenarios can happen here:
A. You buy at the tax sale, don't pay any future taxes and it goes to tax sale next year and someone else buys it. The original owner (or previous tax sale buyer) who lost it to you, they have 3 years to redeem it from the date of the tax sale that you got it. If they redeem it during those 3 years you are paid back for the amount you paid at tax sale plus interest.
B. You buy at the tax sale, don't pay any future taxes and it goes to tax sale next year and someone else buys it. The original owner you got it from doesn't redeem the property and 3 years go by and you fail to redeem the property. Your lost your right to do a redemption and the person who bought it from you can now do a suit to quiet title. You, the original owner and anyone else with an interest in the property will be sued so they can get clear title. In this case you never get repaid if you fail to contest the suit or redeem the property with in 3 years from the date that you lost it at tax sale. Your tax sale never becomes invalid or expires in LA like in some states. But, a suit to quiet title will remove the lien from the property.
2. When it goes back to tax sale, it doesn't matter what % you had, the new tax sale buyer will receive what ever % he bid and won the auction. It only matters for the original owner. For example, you won it at tax sale at 100%, but the following year you let it go back to tax sale and someone bids 80%, and then that person keeps it for 3 years and does a suit to quiet title. You do not get the 20%, the original owner does. You never owned the property you just owned a tax lien. The % bid is of ownership of the property and that can only be between the actual owner and the tax sale buyer who is quieting title. As a tax sale buyer, when you stopped paying and then failed to redeem with in 3 years you lost your ability to sue to quiet title to make you a legal owner.
3. Yes you can get your investment back plus interest if you refuse to pay subsequent taxes but only if someone before you (original owner or previous tax sale buyer) redeems the property. If 3 years go by from the date of the tax sale where you got it, then no one before you can do a redemption. If 3 years go by from the date of the tax sale where you lost it to the next buyer, then you lose your ability to redeem the property and you are out your investment. (See 1B above).
4. The next buyer will never pay you back, it's the other way around. At the tax sale, the next buyer is only paying the tax bill (plus penalties and interest) that you failed to pay. The next buyer nor the parish care about you getting your money back. The only way you get your money back is if the person you purchased the tax sale from decides to do a redemption. The buyer who comes after you just wipes out your lien after 3 years when they do a suit to quiet title.
Some people use this as a strategy. They buy at the tax sale and then don't pay the next tax bill and let it go back to the next tax sale auction. Then if the property isn't redeemed with in 3 years by the person they got it from, they redeem it from the person who bought it after them. It's a way to not have to keep tying up your money by paying subsequent tax bills, allowing you to have more money available to spend on the actual tax sales. The downside is that when you do the redemption you are paying a lot of money in interest and penalties to the guy who bought it from you. Once you do the redemption then you sue to quiet title and sell the property and make your money back plus profit from the sale of the property.
If you don’t pay the new taxes then yes it will eventually go back into tax sale. The new tax sale buy would eventually take your ownership away from you.
No you will not get any money back from the new tax sale buyer. ***
*** Possible exception depending on state law and court precedents, if you are due a “bid balance” from the new tax buyer you may be able to make a claim. I don’t know if that happens in your state and even if it does you may not have a valid claim since you did not pay the required subsequent taxes.
Nothing like that in Louisiana. You don't pay the tax bill, it goes to the next year's tax sale. Tax bills go out in December, the tax sale is usually the following July. Once he loses it at tax sale then he has 3 years to do a redemption or his money is gone. Only exception is if someone before him does a redemption before their 3 years has expired. This is why the out of state hedge funds only bid on properties that have a high likelihood of being redeemed. They don't want to own the property they just want the owners to redeem so they can make the interest.
The previous owner lost the property because they did not pay the property taxes.
The same would happen to you if you do not pay the property taxes that you would owe as the new owner.
If my ownership is 30%, what is the ownership new bidder could bid start from 100% or 30% ?
What about my tax Lien Certificate? My previous investment is gone ?
So you bid and won the tax sale at 30%, then don't pay the next tax bill.... When it goes to the next tax sale it will start at 100%. It doesn't matter if you had 100% or 1%, the only time your percentage matters is when you sue to quiet title after 3 years. If you keep paying the tax bills and 3 years go by then you can start a suit to quiet title. You would also have a suit to do a partition. To keep it simple, the property would be sold and you would get 30% and the original owner would get 70%. (See #2 from my post above.)
So, my previous investment is in danger if I don't pay the subsequent taxes. And the original owner won't get any more harm if he doesn't pay the subsequent taxes. He can still live in his delinquent tax house for 3 - 4 years, and I have to pay his taxes, and my ownership is locked at the first bidding percentage, my ownership won't increase even I paid 3 - 4 years taxes in future. If someone bid at 1% ownership, For every 4 years, the original owner could only lost 1% value from his property. Buy back 1% ownership from tax lien invester every 4 years. Pay 1% for every 4 years, it's 0.25% per year, it is even lower than the state's property tax.
Thank you.
Correct in all regards to you. Although, the original owner still has harm, if he doesn't redeem the property with in 3 years then he can't do a redemption. Now you might not be the one doing the quiet title suit but it's very likely the person after you will (unless he bid 1% also lol).
I wish more people would educate themselves before going online and bidding in Louisiana property tax sale auctions. Too many people bid 1% and have no clue what the hell they are doing. When you bid 1% you have to be very confident the original owner is going to redeem the property. You are betting on it. If they don't redeem it, you don't get your money back. Which typically someone not redeeming is awesome because you can do a suit to quiet title and take ownership of the property and sell it. BUT not when you are a 1% owner and have been paying taxes on it for 4-5 years!
Bidding 1% makes you the winner of the tax sale auction but only on properties that are redeemed.
@Bingji Wang yes your pervious investment is in danger but there is not much you can do about it. Buying only 30% of a house in tax sale is a very high risk investment. Paying ALL the new taxes to protect only 30% ownership doesn't sound like a good investment either.
Now I don't know your states specific tax sale details but I presume any new lien/deed sale wipes out any previous interest if he bids 100%. If someone else bid 50% for example, I would expect that you and the previous owner would split the remaining 50%, 70/30. So if a new bidder bid 50% then you would wind up with a 15% interest instead of your current 30%. That assumption is based on logic, but laws aren't always logical or fair.
Based on that your best bet is to bid 100% in the new sale. or at least significantly more than the 30% you have now. Based on the math above if you bought the new lien/deed at 50% you would then own 65% the new 50% plus the 15% left on your old certificate.
Now I don't know the value of the house. This may still be worthwhile. It is conceivable that you could do a partition lawsuit and force a sale to split the proceeds (30-70). If the property is very valuable it may be worth the expense and trouble. Also if it simply sells at a market price in a normal sale transaction then you eventually get paid from the proceeds. But if that doesn't happen for many years and you are paying the taxes in the mean time, again they may not be worth it.
Keep in mind all my responses above is all of my posts are based on logic and my general knowledge of tax sale. It is not legal advice for your particular state or situation.
Good luck.
In Louisiana....
If he lets it go back to tax sale he retains no %. He only has a tax lien on the property he is not an owner. His lien will be removed when the tax sale buyer after him sues him to quiet title. Now, the original owner who actual owns the land.. the suit to quiet title against them would be just for the % that tax sale buyer bid at tax sale.
Lots of good info in this post - thanks guys! Still in learning curve experimenting with a few of these in Louisiana (@Will Sifert). A few related questions:
1) If I do pay subsequent years taxes and the owner does end up redeeming in <3 years, I do get that subsequent years “investments” back with interest, right? In other words, I’m not just paying it to protect my original investment - I’m paying it to invest more $ at a good interest rate in the event of redemption. It only makes sense, but I haven’t found that written clearly anywhere official. I see that I’m now listed as the “Taxpayer” on the sheriff’s website, but there’s nothing on the tax lien certificate itself that says I’ll get interest on subsequent years taxes/investments in the event of owner redemption.
2) Anything special that I’m supposed to do when I go to pay the subsequent taxes to make sure it’s clear that I’m paying it as a part of a tax lien investment? I could pay all of the 2023 taxes online right now, but there’s nothing online that makes any distinction between the taxes I owe on my personal home and the “taxes I owe” on my tax lien investments.
3) After paying the taxes each year, should I expect any kind of document confirming my new “lien balance” now that I’ve paid another years taxes? I’m assuming that the owner now has to pay more to redeem now that I have paid more taxes on their property but trying to confirm that.
For example, I bought a 2022 tax lien. I do want to protect my interest but I would hate to pay the 2023 and 2024 taxes, then learn in 2025 that the owner redeeemed and I get the 2022 investment +5% +1%/month, but lose my 2023 and 2024 tax payments because I did something wrong or misunderstood my investment when a I paid those subsequent taxes.
Thanks for taking the time to read this far, and thanks in advanced for any replies.
Lots of good info in this post - thanks guys! Still in learning curve experimenting with a few of these in Louisiana (@Will Sifert). A few related questions:
1) If I do pay subsequent years taxes and the owner does end up redeeming in <3 years, I do get that subsequent years “investments” back with interest, right? In other words, I’m not just paying it to protect my original investment - I’m paying it to invest more $ at a good interest rate in the event of redemption. It only makes sense, but I haven’t found that written clearly anywhere official. I see that I’m now listed as the “Taxpayer” on the sheriff’s website, but there’s nothing on the tax lien certificate itself that says I’ll get interest on subsequent years taxes/investments in the event of owner redemption.
2) Anything special that I’m supposed to do when I go to pay the subsequent taxes to make sure it’s clear that I’m paying it as a part of a tax lien investment? I could pay all of the 2023 taxes online right now, but there’s nothing online that makes any distinction between the taxes I owe on my personal home and the “taxes I owe” on my tax lien investments.
3) After paying the taxes each year, should I expect any kind of document confirming my new “lien balance” now that I’ve paid another years taxes? I’m assuming that the owner now has to pay more to redeem now that I have paid more taxes on their property but trying to confirm that.
For example, I bought a 2022 tax lien. I do want to protect my interest but I would hate to pay the 2023 and 2024 taxes, then learn in 2025 that the owner redeeemed and I get the 2022 investment +5% +1%/month, but lose my 2023 and 2024 tax payments because I did something wrong or misunderstood my investment when a I paid those subsequent taxes.
Thanks for taking the time to read this far, and thanks in advanced for any replies.
1. Absolutely, You will get back the subsequent property taxes you paid with interest (1% per month). It is mentioned in the state statutes " *By law your taxes are delinquent after December thirty-first. The law requires interest be charged as follows: A flat rate of one percent (1%) per month on delinquent ad valorem taxes. " The 1% is for any delinquent taxes owed, so not just the amount sold at tax sale but all future amounts. The owner can technically pay the sub tax without redeeming the property. Really no advantage for them to do that other that to save some money on interest if they had enough to pay the tax bill but not redeem at that time. Sometimes they do this by accident or didn't realize there was a tax sale. Every now and again when I go to pay the subsequent taxes one or two will have been paid, but not redeemed.
2. Make sure the property hasn't been redeemed before you pay the current tax bill. It takes some parishes weeks even months to send you a redemption check. It takes some of them weeks to update their online records to show that a redemption has been made. So in most cases it's impossible for you to know without asking if the property has been redeemed recently or even that day. If the property has been redeemed and you pay the current tax bill owed you legally have no right to get your money back. Anyone can pay anyone else's tax bill. Most parishes would refund it to you but you can't count on that. Always let them know you are the tax sale buyer and you are paying the current years taxes owed and ask them to make sure that none of the properties have been redeemed. They would see if that was the case in their computer. ALSO this is a good time to further investigate the property, do a title search on your own if you haven't already done so. Make sure its a good property that you would want to own before you continue to throw more money at it.
3. No you will not receive any type of update. When they go to redeem the sheriff's office will require them to pay you back on everything including interest. If they can not produce 100% of what is owed, they will not allow them to make the redemption. Other thing to note, once the redemption period expires, it doesn't continue to collect interest. At that point the sheriff's office will turn them away if they come to redeem / pay and tell them to contact you. Then it becomes a negotiating game or you get an attorney and file suit to take ownership.