Delinquent Property Taxes
Florida law requires that all real estate taxes be paid by March 31 each year. If those taxes are not paid, the law requires Tax Collectors to conduct an auction and sell “tax certificates” on or before June 1st. A tax certificate sale is not a sale of land, but rather is a lien against the subject property. Delinquent taxes are advertised in a local newspaper prior to the tax certificate sale. The tax certificate sale is open to the public and participants purchase the certificates as investments. The tax certificate sale is conducted in a manner similar to an auction but is different from a typical auction in that bidders are bidding on rates of interest. In essence, the bidders are extending a loan at a specific interest rate, to pay the delinquent taxes for the property owners.
The tax certificate sale is conducted electronically on the internet on or before June 1 every year. The bidder who is willing to accept the lowest rate of interest is awarded the certificate. He or she will then pay the tax collector the delinquent taxes, late-payment penalties, costs of the sale, and advertising charges. The total amount paid for each certificate becomes the face value of the certificate. The bidder will earn interest on the face of the certificate at the rate he or she bid, from June 1 to the date the certificate is redeemed by the property owner. Interest is calculated using the simple interest method. Regardless of when the certificate is redeemed, the certificate holder will earn a minimum of five percent unless the interest bid was zero percent.
Property owners who eventually redeem their tax certificates are required to pay to the Tax Collector the face of the certificate, all accrued interest, and a redemption fee. The face amount plus accrued interest is remitted to the bidders on a weekly basis. Bidder checks are issued every Monday for those certificates redeemed Monday through Friday of the prior week. All interest paid to bidders is reported to the Internal Revenue Service annually. Forms 1099 are remitted to the bidders for interest paid to them by the Collector each year.
Property owners who still have not paid their delinquent real estate taxes within two years after the taxes became delinquent are risking forfeiture of their property in a “tax deed sale”.
After two years, a certificate holder may apply to the Tax Collector for a tax deed by surrendering his or her certificate(s) on the property, redeeming all other outstanding certificates, and paying certain other fees and costs including the current taxes.If taxes remain unpaid after two years from the date of delinquency, the certificate holder may file a tax deed application with the Tax Collector’s office to begin the process of selling the property at a public auction. The Tax Collector mails courtesy warning letters every February to taxpayers that are in jeopardy of their property going to tax deed sale. The letter includes a payment cut-off date and advises taxpayers they are able to make payment on all years that are placing the property in jeopardy, prior to the tax deed process starting.
After the tax deed application is received and all amounts are paid, the Tax Collector notifies the Clerk of the Circuit Court. The Clerk of the Circuit Court notifies the property owner, lien holders, and then advertises the pending tax deed sale. If taxes remain unpaid the actual real estate is then auctioned to the highest bidder by the Clerk of the Circuit Court. The minimum or opening bid is the sum of all taxes, interest, costs and fees paid up until the sale. If the property is homestead property, one-half of the latest assessed value of the property must be added to the minimum opening bid. The tax deed applicant receives his money back from the sale proceeds plus one and one-half percent interest per month from the time the application is made until the land is sold.
Prospective bidders who plan to participate in the tax certificate sale should research the properties on which they plan to bid. Some of the parcels may be easements, landlocked property, alleyways, or other property that has little or no value. There are no guarantees that tax certificates will turn out to be good investments. By law, certificates are canceled after seven years unless extended by some administrative action such as bankruptcy. Certificates can be canceled due to certain statutory errors, in which case the bidder will receive 8 percent interest or the bid amount, whichever is lower.
The tax certificate sale is a method by which the various taxing authorities may still receive tax revenue when property owners do not pay their taxes. The taxing authorities receive money that funds their budgets and certificate buyers earn interest on their investments.
Tax payers desiring to pay off their delinquent property taxes must pay with certified funds. No personal or business checks can be accepted.