The law says later years’ taxes shall be “assessed to and paid by the tax sale purchaser” until the property is redeemed.
The primary risk of not paying later years’ taxes is the property may be sold at a later tax sale. If that happens, you will have the right to redeem or annul the later tax sale. There is no “best” strategy. Louisiana Tax Sale Lawyers can help you weigh the benefits and risks of different strategies.
Louisiana Tax Sale Lawyers can help you navigate through the tax sale process and understand the risks and rewards of tax sale investing. If you are new to tax sale investing or new to investing in Louisiana, we can explain the risks and rewards of tax sale investing and suggest strategies. You will need a lawyer to help you obtain a judgment quieting title and/or to defend a nullity action.
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Some tax sale properties have property tax assessment issues. Correcting excessive assessments and other problems can lower your future (and past) taxes on the property. Appeals to the Louisiana Tax Commission are sometimes required.
Louisiana Tax Sale Lawyers does not specialize in property tax assessment appeals or Louisiana Tax Commission appeals or proceedings. The firm may assist tax sale clients in dealing with assessment issues relating to tax sale properties on a case-by-case basis.
Many tax sale properties have code enforcement issues. These range from existing code enforcement judgments to code enforcement proceedings brought after you acquire your tax sale interest. On low-value properties, actual and potential code enforcement issues can make tax sale investing very risky.
Louisiana Tax Sale Lawyers does not specialize in code enforcement issues. The firm may assist tax sale clients in dealing with code enforcement matters relating to tax sale properties on a case-by-case basis.
Before you can sell or borrow money to renovate a tax sale property, you will need title insurance. A judgment saying the tax debtor was “duly notified” and you are the owner may not be enough. Most title insurance companies want you to show that a very diligent effort was made to identify, locate, and notify all interested persons. At Louisiana Tax Sale Lawyers, our objective is to do whatever is necessary to allow you to obtain title insurance. In some cases, however, it can be difficult or impossible to meet the title company’s standards. In those cases, a title policy may be available (at a substantially higher cost) from a company that specializes in insuring tax sale properties.
The best strategy for you will depend on the value of the property, your percentage interest, the cost of quieting title, how long you are willing to wait, and whether you want a cash return or title to the property. The best strategy for dealing with a 100% interest in a high-value property will be dramatically different from the best strategy for dealing with a 1% interest in a low-value property. Louisiana Tax Sale Lawyers can help you choose the best strategy based on your objectives and the unique facts surrounding your tax sale. The following strategies may or may not be the best for you.
Late Redemptions — A “late redemption” is a sale of your tax sale interest back to the tax debtor. It is not uncommon for tax debtors to contact you after the redemption period has expired. You can also contact them. The price is negotiable based on the factors mentioned above. A typical starting point is the redemption price plus a premium.
Quieting Title – You will need insurable title to sell or renovate the property. Quieting title requires formally notifying all parties whose interests you want to terminate, such as owners, mortgagees, and other lienholders. After the sending of post-sale notice or service of a quiet title action, interested persons have six months to file a nullity action (60 days if the tax sale is more than five years old). If they don’t file a nullity action on time, you are entitled to a judgment quieting title to your percentage interest. If you have less than a 100% interest, you may need to file a partition action. In a partition action, one co-owner may buy out the other co-owners’ interests. If no agreement can be reached, the court will set a price or the property will be sold at a sheriff’s sale. The proceeds are divided according to each co-owner’s percentage interest.
Nullity Actions – A nullity action may be filed against you – typically in response to a quiet title action. If your tax sale is annulled, you will be entitled to a nullity payment. That will usually be the redemption price plus some noticing and other costs. It will not include attorney fees. Defeating a nullity action (and winning a quiet title action) will depend on when the person bringing the nullity action was “duly notified” of the tax sale and when the nullity action was filed.
Wait and See – Some tax sale purchasers elect to wait and see what happens, allowing interest and penalties to accrue while hoping for a late redemption. If you elect this strategy, be aware of the effects of not paying later years’ taxes.
The redemption price is the tax sale price plus a 5% penalty and 1% interest per month on the tax sale price. If you paid later years taxes, the redemption price includes a 5% penalty and 1% interest on those amounts. The redemption price includes taxes owed to the tax collector, but those amounts do not affect you.
The redemption price is calculated by the tax collector and paid to the tax collector, usually without input from the tax sale purchaser. While the tax collector should know a tax payment was made, they may not know you made the payment. Keep copies of receipts and canceled checks for all tax payments made after the tax sale. Some tax collectors want to see copies before they issue the redemption check to you.
The redemption price should include taxes paid to both city and parish tax collectors. Notify the tax collector who issued your tax sale certificate of any payments made to the other tax collector. They may not automatically include them in the redemption price.
The redemption price should include redemptions of other tax sales, but the law is not clear on this issue. Louisiana Tax Sale Lawyers recommends buying out other tax sale purchasers rather than redeeming their tax sales. There are three advantages. First, a tax sale certificate you buy will continue to accrue interest. Second, a person seeking to redeem or annul your tax sale will also have to redeem or annul the other tax sale. Third, you don’t have to worry about the price you paid to redeem another tax sale not being included in the redemption price for your tax sale.
The redemption price should include any “statutory impositions” you paid in addition to taxes. Statutory impositions are any amounts included on the tax bill, including security district fees, homeowner’s association dues, and code enforcement judgments. As code enforcement judgments can exceed the amount of taxes owed, whether you should or should not pay those amounts is not an easy question to answer.
The Fourteenth Amendment to the United States Constitution says no state shall “deprive any person of life, liberty, or property, without due process of law.” Tax debtors and other interested parties are entitled to notice and a reasonable opportunity to be heard before they can permanently lose their property interests. Under Louisiana’s tax sale laws, “duly notified” means an effort meeting the requirements of due process was made to identify and notify the interested person. Actual notice is not required, but is preferred. Notice can be provided by you or the tax collector. Notice can be provided after the tax sale, including through service of a petition to quiet title.
It is possible there is or will be an earlier tax sale, another city/parish tax sale from the same year, and/or a later tax sale of the tax sale property you just purchased. You may want to redeem the other tax sale, buy out the other tax sale purchaser’s interest, or sell your interest to the other tax sale purchaser. Louisiana Tax Sale Lawyers can explain the advantages and disadvantages of different strategies, help you choose the strategy that is best for you, and help you determine the best price to pay or accept to buy or sell a tax sale certificate.
Tax sales are used to collect delinquent property taxes. If property taxes are not paid in full by December 31 of the tax year, the city or parish may sell “tax sale title” to the property for the amount of taxes owed plus interest and costs.
The property owner has three years to “redeem” the tax sale (18 months for blighted/abandoned properties) by paying the tax sale price, later taxes paid by the tax sale purchaser, plus a 5% penalty and 1% interest per month on those amounts. Delinquent taxes owed to the city or parish must also be paid. If a tax sale is not redeemed, the tax sale purchaser may be able to acquire title to the property.
Properties subject to city and parish taxes may be sold at separate city and parish tax sales in the same year. When that happens, the city tax sale will be subject to the parish tax sale. Louisiana Tax Sale Lawyers can explain the risks and rewards of investing in those parishes and suggest strategies for protecting your investment.
Payment is required at the time of the tax sale or a few days later. Some auctions require advance deposits or proof of funds. If you do not pay, you may be banned from future tax sales. A few weeks after the tax sale you should receive a tax sale certificate.
The tax debtor and other interested parties (such as mortgagees or lienholders) have three years (18 months for blighted/abandoned properties) to redeem the tax sale. The redemption period starts on the day the tax sale certificate is recorded in the conveyance records.
The current reality is that many tax sale properties are bid down to 1%. If you are not the first 1% bidder, you may not win that property. As the redemption price is the same, the risk is that the tax sale will not be redeemed. One way to reduce risk is to buy the properties most likely to be redeemed. You can also minimize risk by buying more properties. This may allow losses on unredeemed properties to be offset by returns on redeemed properties and/or profits on properties to which you acquire title.
The tax sale price is always the same. Instead of “bidding up” the price, people “bid down” the percentage interest they will get in the property. The bidder who offers to buy the least percentage interest wins. Many online tax sale auction sites allow you to set a minimum bid. Your public bid starts at 100% and goes down in response to other bids.
IMPORTANT: The percentage interest is the ownership interest you may acquire if the tax sale is not redeemed or annulled. If you bid 1%, you are bidding to own 1% of the property if the tax sale is not redeemed. The tax debtor will still own the other 99%. It is possible that a 1% ownership interest will be worth less the tax sale price.
Tax sales are the only method for cities and parishes to collect delinquent property taxes. They are held annually by the sheriff or the municipal tax collector. Many tax sales are held online. Others are held in the same manner as sheriff’s sales.
If a tax sale is not redeemed, tax sale title can be converted into full ownership of the property. This happens infrequently because most tax sales are redeemed and many tax sale purchasers allow “late redemptions.” Sometimes, the cost of quieting title may exceed the value of the property interest.
Most people invest in tax sales to collect the redemption payment. Annual returns start at about 14%. Returns of more than 20% are possible if a redemption occurs in the first six months after the tax sale.