Every so often associations will unexpectedly receive notice that a tax deed has been applied for in connection with a parcel or condominium unit in the community. Those notices will describe tax certificates, provide a redemption amount, and state the date on which the parcel or unit will be auctioned for unpaid property taxes if the redemption amount is not paid. Board members will often have questions when they review these notices and will need to obtain legal advice about what their associations should do, if anything. Although these matters should be reviewed with legal counsel on a case-by-case basis, there are some general things about tax deed sales that associations should know.
Property taxes are a first lien upon parcels and units. Property taxes become delinquent if they are not paid on or before March 31st. A property tax delinquency will cause the local tax collector to advertise and sell tax certificates. The purchaser of a tax certificate may apply for a tax deed sale after two years have elapsed since April 1st of the year that his or her tax certificate was issued. The tax deed sale application triggers notice that a tax deed has been applied for to interested parties, and associations typically receive notice due to their assessment lien rights. If the property owner or any other person pays the redemption amount before the tax deed sale, the tax deed sale will be canceled. If no redemption occurs, the tax deed sale will proceed as scheduled.
Tax deed sales are conducted by county officials or are conducted online and are administered as auctions. Tax deed purchasers will be issued a new title to the parcel or unit (rather than a transferred title), and the new title will be free and clear of encumbrances (i.e., mortgages, liens, and judgments), including association assessments and amounts secured by assessment liens. However, pursuant to Fla. Stat. §718.120 and §720.312, condominium and homeowners’ association covenants and restrictions, as well as assessments that come due after the tax deed has been issued will continue to be enforceable against the tax deed purchaser and against his or her successors in title.
Tax deed purchasers who are interested in procuring marketable, insurable title to the parcel or unit that they purchased may pursue quiet title actions pursuant to Fla. Stat. §65.081, and these cases may additionally allocate any tax deed sale surplus proceeds amongst interested parties. If no such case is pursued and surplus proceeds remain, the county clerk may initiate an interpleader lawsuit to have a court determine which interested party or parties are entitled to the surplus.
Note that, if a parcel or unit is mortgaged, typically the mortgage holder will escrow funds and pay property taxes each year—avoiding a property tax delinquency. However, tax deed sale issues arise periodically on parcels or units that are not mortgaged, on parcels or units that have been acquired by the association, and/or on parcels or units under other circumstances. Whether or not an association should pay to redeem the tax certificates should be discussed with counsel and given careful consideration. Since the obligation to pay property taxes is the property owner’s obligation, associations need to ensure that any decision to pay redemption amounts is accompanied by a reasonable rationale and a considered legal strategy. Also, if a tax deed has been issued in your community that eliminated an assessment delinquency, you may want to ask the association’s attorney if there are surplus proceeds that can be claimed by the association.
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