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Redemption Period for Buying Tax Liens Certificates

written by: ciel s cantoria•edited by: Donna Cosmato•updated: 8/29/2010

In acquiring property sequestered by the government due to unpaid taxes, previous owners are also entitled to redemption periods. Tax Liens Certificates buying is said to be lucrative and have promises of great returns, but where do you stand if the owner decides to buy back his property?

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    Important Facts about Buying Properties with Tax Liens

    Notice of Trustees Sale 

    In buying real estate with tax encumbrances, you should be aware that the previous owners of such properties are entitled to buy it back within a specific redemption period. Tax Liens Certificates issued in your favor as proof of purchases do not serve as proofs of ownership, hence, you have no other recourse but to sell back a property that a previous owner wishes to redeem.

    In relation to this information, there are other facts you should know about redemption periods concerning properties bought at tax sales auction:

    (1) State laws provide that any purchaser of property acquired through a tax sale shall not be entitled to any reimbursement for improvements or additions made to the property purchased, provided the purchaser can prove that the buyer of the property with a tax lien has no prior knowledge about the redemption rights of the previous owner.

    However, it would be hard for the purchaser to prove such a condition because the rules of the tax sale auction contain information about the redemption period, and by which state laws the redemption period will be governed.

    (2) In addition, state laws could further mandate that the purchaser of the tax forfeited property make his own inquiries or check pertaining to information surrounding the property during the redemption period.

    (3) Existing Tax Liens Certificates may, likewise, be requested to have an extended period of redemption for whatever purpose it may suit the owner or the purchaser in order to protect their respective interests.

    (4) The redemption period will not apply if the tax sale auction did not strictly adhere to the rules of notification, which requires that the previous owner should be properly notified by mail and not just by mere publication that the property is up for public bidding.

    Publications about bidding notices are constituted by law as mere advertisements of the property for sale and not a direct notification to the previous owner regarding his rights to redemption. In this case, the previous owner may redeem his property without the need to consider any provision for a redemption period. Tax lien sale of his property will be considered as null and void.

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    What Are Considered as Reimbursable in Case Redemption Takes Place?

    page1-463px-Goldman v. Twenty-First Century Democrats Plaintiff's Memorandum of Points & Authorities in Opposition to Motion to Dismiss.pdf 

    If you are the holder of a Tax Lien Certificate, it is important for you to make sure that all the legal requirements pertaining to the sale and issuance of the tax forfeited property had been met even after your tax liens investment purchase was made.

    In the event that the previous owner takes a particular course of action in connection with the sequestration of his property for tax delinquencies, the amount of your entitlement in terms of reimbursements could be affected.

    The owner may take steps to reclaim by way of simple redemption or through a lawsuit whose outcome will be based on judgments against the legality of the tax sale. Should the court rule the sale as null and void, you will not be able to maximize the reimbursements you are entitled to claim under simple redemptions. This includes the following:

    • All taxes paid, penalties, accruals including special assessments paid by you as a tax liens purchaser during and after the purchase of the tax sale and pertaining to the property with tax lien.
    • The value of the property paid which caused the issuance of a Tax Lien Certificate in your favor as the purchaser.
    • Any redemption amount paid for by you as the taxpayer who acquired the Tax Certificate of Sale.
    • Reimbursements you made to the city, town, county, village or subdivision in connection with demolitions or other courses of actions taken in order to make the property physically suitable and available to you.

    A tax lien investment is not a simple matter, because even the U.S. Government through the IRS, could make tax claims over a certain property for unpaid federal taxes. What we recommend is for you to seek professional counsel when entering into real estate transactions because it could get complicated by other legal aspects, like the owner’s right to a redemption period. Tax Liens Certificate buying could easily turn awry by any oversight in legal requirements.

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    Reference Materials and Image Credit Section

    Reference Materials:

    • Tax Lien Investing: What Is A Redeemable Deed And How Does It Differ From A Tax Lien? ---
    • What are “Tax Forfeited Properties"?---
    • what_is_a_tax lien certificate? ---

    Image Credit:

    • All images are courtesy of Wikimedia Commons