Delinquent Property Taxes
Real Estate taxes become delinquent on April 1st of each year. After real estate taxes have become delinquent, they are advertised in a local newspaper and the advertising and collection cost is added proportionately to each delinquent tax bill.
On or before June 1st, the Tax Collector must conduct a tax certificate sale for unpaid taxes on each parcel of property. The sale is operated on a competitive bid basis with interest bids beginning at 18% and progressing downward. When a certificate is sold against a piece of property, the successful bidder pays the delinquent taxes on that property and holds a certificate which constitutes a first lien against the property.
To redeem the certificate, the owner of the property must pay the Tax Collector the delinquent taxes plus accrued interest, advertising cost, and fees. The Tax Collector will reimburse the certificate holder all monies due and the property will be free of that tax lien.
If the tax certificate is not redeemed within two years, the certificate holder may file a tax deed application with the Tax Collector. The property owner is notified of this action and, if the taxes are not paid, the Seminole County Clerk of the Circuit Court conducts a public auction and sells the property to the highest bidder.
Florida Tax Certificate Process
What are tax certificates?
Tax certificates and the public auction of them are governed by Chapter 197 of the Florida Statutes. If you are contemplating participating in a Florida Tax Certificate Sale, read the appropriate Statutes sections and familiarize yourself with the process. The procedures and requirements mentioned here are based on Chapter 197.
In Florida, property taxes become due November 1 each year, and become delinquent if not paid by April 1 of the following year. The Tax Collector in every Florida county prepares a list of the properties with delinquent taxes as of April 1st, and sends out second notices to all of the delinquent property owners stating that a tax certificate lien will be in an auction sale on or before June1 if the taxes are not paid.
The face amount of the tax certificate consists of the sum of the following: delinquent real estate tax (unpaid amount), interest (1 1/2% for each of the months of April and May on the delinquent amount), Tax Collector's collection fee and the newspaper advertising charge (plus any other incurred cost).
Tax certificates are a first priority lien against Florida property. There are generally no other recorded claims against a property which would take precedence over the tax certificate lien, if the property were sold.
To make a simple analogy, consider the purchase of a tax certificate as a type of unrequested loan to the property owner. In return, the investor anticipates receiving interest on the money loaned at a public auction determined percent rate. In Florida, the tax certificate conveys no property rights. It is simply a priority property lien carrying an interest rate per annum.
Realize that you are making a financial investment at risk. You are not acquiring a vested interest in the property itself. The purchase of a tax certificate lien and your subsequent allowable action if not paid will very, very rarely result in your ownership of the parcel at a tax deed sale in the Courthouse, and in those rare, rare cases, only after substantial additional investment relative to the value of the property.
The Public Auction
On or before June 1 of each year, the Tax Collector will start the tax certificate public auction.
The interest awarded on a tax certificate ranges from 18 to 1/4%. (Note: Bids of 0% are possible, but provide zero return on the invested dollars.) Bids are submitted and the tax certificate is "sold" to the bidder willing to take the lowest interest rate. Simple annual interest accrues on a monthly basis. As an example, if the certificate carries an interest rate of 6%, then interest will accrue at 1/2% every month, beginning June 1st, until the certificate is redeemed. (There is a caveat that an investor will normally receive a minimum return of 5% over the life of the certificate - IF THE CERTIFICATE IS REDEEMED. There are rare exceptions to this, such as a court-ordered adjustment.) Certificates are valid for 7 years from the date of issuance. At the end of 7 years, the tax certificate is automatically cancelled by the Florida Statute of Limitations, at which time the total invested lien value is zero dollars ($0).
In the very rare instances where there is no bid to pay the delinquent taxes on an individual parcel and therefore no certificate is awarded at the sale, a certificate bearing an interest rate of 18% will be "struck" (issued) to the county and may be purchased at a later date by contacting the tax collector's office. The Seminole County Tax Collector maintains an electronic file on all unpaid certificates through an established retention period. Each entity or individual awarded one or more tax certificates receives an electronic file or a printout of their purchases and an annual IRS Form 1099 for interest paid on redeemed certificates. Each successful bidder has an individual account number assigned to them.
Now you own a tax certificate, so what can happen next?
A certificate holder is prohibited by Florida Statute from contacting the owner of the property with delinquent taxes for a minimum of two years, and in fact should never directly communicate with the taxpayer. Such contact can result in costly legal action against you.
When the owner or another party redeems the tax certificate by paying all delinquent taxes, cost and interest to date, the amount due the certificate holder is calculated and a check or ACH transfer deposit is created by the Office of the Tax Collector and sent to the certificate owner. This completes the concept of a satisfaction of this lien on the parcel.
There is a procedure whereby the tax certificate may be sold and transferred to another named individual/entity. This may be to a current bidder account number, or may require establishing a new account number for the party acquiring the certificate. There is a $2.25 tax collector office fee for each certificate transferred.
What happens if the owner does not pay the delinquent taxes? Two years from the date of the delinquency but no later than 7 years, the tax certificate holder may request and begin a tax deed application process with the Office of the Tax Collector. The certificate holder making application for a tax deed has to pay the Tax Collector an application fee, a title search fee and all amounts required for redemption or purchase of all other year outstanding tax certificates on the parcel, plus any omitted taxes, current or other delinquent taxes. If not redeemed by the property owner within generally the first 90 days, the tax deed application is turned over to the County Clerk of Circuit Court for further action and processing. There will be additional fees billed to you for services by and to be paid to the Clerk of Circuit Court. In most cases the entire process is completed and the property will be scheduled for a public auction tax deed sale in the Courthouse by the Clerk of Circuit Court within 6 months from the initial date of the tax deed application.
The highest bidder at the real estate Tax Deed Sale conducted by the Clerk of the Circuit Court in the Courthouse becomes the owner of the property. If the property is a non homesteaded parcel, the opening bid is the amount of the taxes, accrued interest, plus costs and fees involved in a tax deed process. If it is a homesteaded property, the opening bid is half the current assessed property value plus all taxes, interest, fees, and costs.
IF THE PROPERTY DOES NOT SELL AT THE TAX DEED SALE, THE TAX CERTIFICATE HOLDER IS REQUIRED TO PAY THE CLERK OF COURT SALES, RECORDING AND DOCUMENT STAMP FEES, AND TAKE DEED TO THE PROPERTY. IF THE PROPERTY IS NOT SALEABLE, THE CERTIFICATE HOLDER HAS NO RECOURSE FOR THE FINANCIAL LOSS OF THEIR TAX CERTIFICATE INVESTMENT. BUYERS BEWARE. Know the risk associated with what you are purchasing.
