What is a Tax Certificate or Tax Deed?

A tax deed sale is the sale of property for past due real estate taxes and fees associated with the sale. Each year, real estate taxes are to be paid by a predetermined date to avoid becoming delinquent. Once delinquent, the Tax Collector holds an auction to pay off the taxes. This auction is referred to as a Tax Certificate Sale pursuant to §197.482, Florida Statutes. Expiration of tax certificate.—Seven years after the date of issuance of a tax certificate, which is the date of the first day of the tax certificate sale as advertised under s.197.432, if a tax deed has not been applied for, and no other administrative or legal proceeding, including a bankruptcy, has existed of record, the tax certificate is null and void and shall be canceled. The tax collector shall note the date of the cancellation upon all appropriate records in his or her office. This section does not apply to deferred payment tax certificates.

The successful bidder at this auction is issued a Tax Lien Certificate, which ensures the bidder that the Tax Lien will be paid off, with interest. A tax lien certificate, or tax certificate is not a purchase of property; rather, it is a lien imposed on the property by payment of the delinquent taxes. According to Florida law, the Tax Collector must conduct a sale of tax certificates beginning on June 1 for the preceding year of delinquent real estate taxes

If the Tax Lien Certificate has not been paid off within two years from the date the taxes became delinquent, the holder of the certificate can apply to force a public auction of the property. For example, if 2018 taxes are delinquent April 1, 2019; therefore, a tax deed application may be made after April 1, 2021. In applying for a tax deed, a certificate holder must redeem all other certificates and pay all applicable fees.

The public auction selling the property is referred to as a Tax Deed Sale (FS 197.542).

The monies collected from this Tax Deed Sale are used to pay off the amount owed to the Tax Lien Certificate holder and other costs incurred in the sale process. Remaining lienholders and the property owner may apply for any excess funds.

Notice Requirements:

The legal titleholder of record and all lienholders, including mortgage companies must be notified of the tax deed sale. In certain cases others must also be notified. Therefore, it is important that all property owners keep the tax collector’s office informed, in writing, of any change in address. Failure to do so may mean that you do not receive notice of the sale and may lose your property. However, if the taxing authorities receive a written change of address, they have the obligation to update your address and mail all required notices to that address. The State must take additional reasonable steps to attempt to provide notice to the property owner before selling the property, if it is practicable to do so.

Survival of other Liens:

A tax deed sale extinguishes most liens. For the most part, only liens of record that run with the land, or those held by a municipality or county survive a tax deed sale. A recurrent issue has been whether a tax deed sale extinguishes homeowners or condominium associations’ liens or claims. The prevailing view is that it does and that these claims do not survive a tax deed sale.   Most 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 to any outstanding dues or assessments. There is an important distinction between purchasing properties at a tax deed sale and purchasing them at a foreclosure sale. Purchasers at foreclosure sales may be liable for unpaid dues and assessments. 

When your right to redeem ends:

            If the purchaser applies for a tax deed before the certificate expires, the clerk of the circuit court will hold a tax deed sale. The property is sold at a public auction to the highest bidder (Fla. Stat. § 197.502). You can redeem up until:

• the court clerk receives full payment for the tax deed, or
• the county clerk issues the tax deed (Fla. Stat. § § 197.472, 197.552).

How Much You’ll Have to Pay to Redeem:

To redeem the property, you’ll have to pay the face amount of the tax certificate along with interest and costs (Fla. Stat. § 197.472).

You may also have to pay a mandatory charge of 5%, if the lien purchaser bid less than 5% interest on the debt when he or she bought the lien. However, if the purchaser bid an interest rate of 0% when he or she bought the lien, then you don’t have to pay this charge (Fla. Stat. § 197.472).

Quiet Title Action:

A quiet title action is a lawsuit brought in circuit court where the property is located to clear title to real property. After purchasing a property at a tax deed sale, it is common to file a quiet title action to ensure that other potential interest holders’ claims are wiped out forever. The purpose of a quiet title action is to eliminate all claims to title that might stand in the way of a title insurance company issuing a clear title insurance policy. A successful quiet title action will allow a title insurance company to write a policy insuring title to the property purchased and will make it easier to sell the property later on, provided that all parties are named in the action and that it is properly served on them.

Alternatively, if a purchaser at a tax deed sale holds an interest in the property purchased and pays taxes on it for at least four (4) years, then it is possible to avoid filing a quiet title action. While you might find a title insurance company willing to issue a policy on tax deed property within the four years, without a quiet title action, most won’t. It is far more prudent to go through a quiet title action.

Please contact: Daniel M. Copeland, Attorney at Law, P.A., at 904-482-0616 or submit a contact form.

Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.