Because property taxes are collected by municipalities rather than the federal government, you might be tempted to view skipping property tax payments as a transgression with smaller consequences than skipping an income tax payment. Don’t fall into that misconception: Nonpayment of property taxes can have severe, if not immediate, ramifications that can lead to losing your property.
Interest Charges and Fees
Ignoring that tax bill won’t make it go away. In fact, it will just make the bill larger. To encourage timely payments, many municipalities assess fees and interest charges on unpaid property taxes.
While local laws determine the extent of these charges and how they’re handled, many homeowners receive a grace period after the due date before extra charges begin accumulating. Because these measures are meant to be punitive, interest might accrue at a rate much higher than market rates.
Tax Lien and Lien Sale
If your property tax bill goes unpaid long enough -- the length of time varies by local law -- the taxing district places a lien against the property for the amount due, including interest payments and other fees.
These liens are then sold at an auction to investors, who pay outstanding property tax bills for the property, plus administrative fees. In return, they receive claim on any payment you’ll make on the bill. You’ll be assessed an additional charge, known as redemption interest, on top of the original bills as a return on the lien buyer’s investment.
Redemption Period and Deeds
Once a third party purchases the lien to your property, the clock begins to tick on your redemption period. During this period, which is defined by state or local law and is usually two or three years, you receive a final opportunity to pay your back taxes, plus interest, fees and redemption interest.
If you pay the tax bill, the investor receives your payment and relinquishes any claims on the property. If you fail to make the payment at the end of the redemption period, the lien holder receives a title deed to your property. You forfeit your property, and it’s transferred to the investor.
Because nonpayment of property taxes can cause a property owner to forfeit his home in the tax lien process, lenders construct mortgages to protect themselves from losing their stake in the property.
Mortgages require property owners to make property tax payments, and avoiding these taxes is a violation of the mortgage agreement that allows lenders to begin foreclosure proceedings. Many lenders will take this route to liquidate the home and leverage their investment in the property before it’s seized, and pay off property taxes or liens as part of the proceedings.
- Genesse County Treasurer: Important Information for Property Owners with Delinquent Taxes
- NOLO: What Happens If I Don't Pay Property Taxes in California
- City and County of San Francisco: Delinquent / Redemption / Power to Sell
- Plumas County California. "FAQs - Tax Sale." Accessed Sept. 27, 2020.
- Leon County, Clerk of the Circuit Court and Comptroller. "A Guide to Tax Deeds." Accessed Sept. 27, 2020.
- California State Controller. "County Tax Collectors’ Reference Manual - Chapter 8000: Sale of Tax-Defaulted Property." Pages 52 and 53. Accessed Sept. 27, 2020.
- Texas Constitution and Statutes. "Title 1. Property Tax Code. Subtitle E. Collections and Delinquency. Chapter 34. Tax Sales and Redemption. Subchapter A. Tax Sales." Accessed Sept. 27, 2020.
- Justia. "O.C.G.A. 48-4-5 (2010) 48-4-5. Payment of excess." Accessed Sept. 27, 2020.
- Idaho Legislature. "Idaho Code Sec 63-1007. Redemption - Expiration of right." Accessed Sept. 27. 2020.
- Justia. "IA Code Sec 447.9 (2014): Notice of expiration of right of redemption - county right of redemption." Accessed Sept. 27, 2020.
Wilhelm Schnotz has worked as a freelance writer since 1998, covering arts and entertainment, culture and financial stories for a variety of consumer publications. His work has appeared in dozens of print titles, including "TV Guide" and "The Dallas Observer." Schnotz holds a Bachelor of Arts in journalism from Colorado State University.