What are Tax Deeds and Tax Deed sales?
A property that is up for auction at a Tax Deed sale is one for which the property taxes have gone unpaid approximately 3 years prior to the sale. When property taxes are not paid, the Clerk of Courts will hold a tax lien certificate auction in which potential purchasers “bid” on the purchase of Tax Certificates. The bidding relates to the interest rate the buyer will be entitled to on the Tax Certificate and the lowest interest rate wins. Afterwards, a tax lien certificate will be issued to the person or entity that pays the taxes. The Tax Certificate is secured by a priority lien held by the State of Florida for unpaid taxes.

This money earns interest at the rate agreed to at the auction until the certificate is redeemed by the property owner or a new buyer. After 2 years, if the certificate is not redeemed and the property is not sold to someone else who is willing to bring the taxes current, the certificate holder can apply for the property to be sold at a tax deed sale to raise the money to repay the certificate holder for their investment, plus interest. If the property does not sell at the tax deed auction, the property can go to the certificate holder in lieu of payment.

What liens and encumbrances remain on the property after a Tax Deed sale?
The only liens that remain after a Tax Deed sale are certain state, county, and municipal liens and Federal tax liens. The municipal liens are usually paid using the surplus funds from the Tax Deed sale (i.e. the amount of the bid that exceeds the amount required to pay the past due taxes, plus interest and Clerk of Court’s costs). If there is not enough money to pay the municipal lien, the new buyer would have to satisfy the lien in order to erase it from the title. Federal Tax liens provide the Federal Government with a right of redemption.

What about liens from homeowners associations?
The only liens that should remain after a Tax Deed sale are state, county and municipal liens and Federal tax liens. However, condominium and homeowners associations can sometimes be reluctant to admit that their lien for past due assessments has been extinguished by the tax deed sale and try to get the tax deed buyer to pay them. We can assist you in making sure all liens are removed.

Is there a redemption period for the former owner to pay the taxes and reclaim the property?
There is no specific “redemption period” for Tax Deeds. When the property is sold at the Tax Deed sale, the new buyer receives a “tax deed.” Under Florida law, a tax deed gives the buyer the right to possession of the property. However, the buyer does not immediately have “marketable title” because there is a 4-year period of time in which the previous property owner or lien holders can object to the sale. While the tax deed buyer can transfer title to a potential buyer by Quit Claim Deed, they cannot execute a Warranty Deed and cannot provide their buyer with an Owner’s Title Insurance Policy until 4 years after the Tax Deed sale.

This is why Quiet Title actions are necessary for Tax Deed purchasers. Anyone who may potentially claim an interest in the property at the time of the Tax Deed sale are Defendants and are served with the lawsuit. These defendants have 20 days to respond with an objection or they are defaulted by the Clerk of Court. If there are no objections, we then ask the Judge to enter a Final judgment in favor of the Tax Deed buyer to “quiet” the previous interest of the defendants and extinguish the time they have to object to the Tax Deed sale. If a defendant does respond to the lawsuit, they can only object by proving they actually paid the taxes or that they were not properly notified prior to the Tax Deed sale and, therefore, were unable to pay the taxes.

Is there a way to obtain information on scheduled tax deed sales in Florida?
In Florida, the Clerk of Court performs the tax deed sales for a particular county. Many of these counties provide helpful Tax Deed information on their county government web sites and some also provide a list of the properties expected to be auctioned in the near future.

For more information or for assistance in making a Tax Deed purchase, please contact the Law Office of Henry W. Hicks.