Thursday, May 29, 2014

Real Property: Tax Certificates 101

By Stephanie Adams

In Florida, if property owners fail to pay real property taxes when due, they risk having their property sold at a public auction to the highest bidder. If the taxes are not paid, a tax certificate will be sold.

On or before June 1, the tax collector must hold a tax certificate sale for unpaid real estate taxes from the prior year. The amount of the certificate is the sum of the unpaid taxes, interest, costs, and charges on the real property. Tax certificates are sold by public auction or electronic sale and awarded to any person who pays the amount of the certificate and bids the lowest rate of interest. The tax certificate sale opens with bidding at 18 percent rate of interest, and the interest rate is bid down until the tax certificate is sold to the lowest bidder.

Once a tax certificate is issued, any person may redeem it before a tax deed is issued and prior to its expiration seven years after the date of issuance. In order to redeem a certificate, the face amount of the certificate plus all interest, costs, and charges must be paid to the tax collector. If a tax certificate is redeemed and the interest earned on it is less than 5 percent of the face amount of the certificate, mandatory minimum interest of 5 percent is levied upon the certificate.

After two years have elapsed since April 1 of the year in which the tax certificate was issued, and before the tax certificate expires, the holder of a tax certificate (other than the county) may apply for a tax deed with the tax collector. Upon filing of an application for a tax deed, the certificate holder must pay the tax collector “all amounts required to redeem or purchase all other outstanding tax certificates, any omitted taxes, any delinquent taxes, any outstanding interest, and current taxes, if due, covering the property.”

Once an application for a tax deed is filed, the clerk publishes a notice once a week for four consecutive weeks in a newspaper available to the public generally where the property is located. The clerk must send notice of the sale to certain persons of record having an interest in the property, including any legal titleholder, lien holder, and any mortgagee, based upon information provided by the tax collector. At a tax deed sale, the property is sold to the highest bidder. Once a tax deed is issued, any mortgages, liens, interests, or other restrictions against the property are extinguished, unless held by the government.