Tax Deed Investing

Tax Deed Investing Information, by Susan P. Bakalar, Esq.

tax deed

What is a Tax Deed? A tax deed is a legal document that grants ownership of a property to a government body or investor / corporation when the property owner does not pay the property taxes. A tax deed gives the government the authority to sell the property to collect the delinquent taxes and transfer the property to the purchaser. Such sales are called “tax deed sales” and are usually held as auctions where the minimum opening bid is the amount of back taxes, accrued interest charges and fees owed. In some instances, such as a property in which there is a homestead exemption, the county will add an additional allocation for a percentage of the tax assessed value.

What is a Tax Deed Sale? A tax deed sale is the sale of property for past due real estate taxes and fees associated with the sale. Real estate property taxes are to be paid annually to the county in which the property is located by a predetermined date. If not paid by the date due, the taxes are considered to be delinquent. Once delinquent, the Tax Collector may conduct an auction to pay off the taxes. The auction is referred to as a Tax Certificate Sale (FS 197.432).

The successful bidder at a Tax Certificate auction is issued a Tax Lien Certificate (not a Tax Deed), which ensures the certificate holder that the tax lien will be eventually be paid off, with interest and any accrued county related fees and costs. A tax lien certificate, or tax certificate does not convey ownership of the subject property; rather, it is simply a lien imposed on the property. According to Florida law, each year the county Tax Collector must conduct a sale of tax certificates beginning on June 1 for the preceding year of delinquent real estate taxes.

If a Tax Lien Certificate has not been paid off within two (2) years from the date the real estate taxes became delinquent, the certificate holder may apply to the county in which the property is located to force a public auction of the property and these auctions are held either online or in person, depending on the county. In applying for a tax deed, a tax certificate holder must redeem all other certificates and pay all applicable county fees and costs. This is important to recognize as the successful bidder at the tax deed sale will obtain title to the property knowing that all real estate taxes due for prior years have been paid and are current. The county’s public auction selling the property is referred to as a Tax Deed Sale (FS 197.542).

Notice Requirements: The legal titleholder of record as well as any and all lienholders, including mortgage companies, must be notified of the tax deed sale. Notice to all required parties is given by the County prior to sale. In some cases, certain other parties must also be notified. For example, owners of lots contiguous to the property described in the tax certificate must be notified in advance of a tax sale when the property described for sale is either submerged land or considered to be common elements of a subdivision. [See Surna Constr., Inc. v. Morrill, 50 So. 3d 47, 49 (Fla. 5th DCA 2010)]

Failure to comply with the notice requirements may be a violation of due process and may void the tax deed sale if the sale were to be challenged. Property owners must advise the tax collector’s office, in writing, of any change in address. Failure to provide changes of address or alternate mailing address may mean that the property owner may not receive notice of the sale and could potentially lose title to the property at tax deed auction.

Do Other Liens Survive a Tax Deed Sale? Tax deed sales extinguish most other liens. Only liens of record that run with the land, or those held by a municipality or county survive a tax deed sale. Homeowners or condominium associations’ liens or claims generally do not survive a tax deed sale. Current case law currently holds that any liens for past assessments do not survive and that the associations cannot hold purchasers at tax deed sales responsible for the payment of any outstanding dues or assessments. [See A to Z Props. v. Fairway Palms II Condo. Assoc., 137 So. 3d 453, (Fla. 4th DCA 2014) (An owner of property acquired by tax deed is not liable to an association for unpaid assessments that accrued prior to the issuance of the tax deed.)]