Florida Tax Certificates – Part Two

Tax Certificate sales, redemption, and tax deed sales

 July 2, 2007 – Palm Coast, Florida

The May publication (three consecutive times) of the tax delinquent properties is followed by the tax certificate sale, held this year on May 31. The tax certificate is a lien against the property, not a claim or deed to it. Most people who buy tax certificates do so as an investment, shunning property that may not be redeemed.

First, any winning bidder for a tax certificate pays the total amount due, including the recent year’s delinquent taxes, interest to date, and any costs associated with the sale, including advertising, etc. So price is not an issue. Participants bid on the interest rate that they propose to charge the delinquent tax property owner. The bidding starts at the state mandated maximum rate of 18%, proceeding downward in increments of at least ¼ point. The lowest interest rate bid is the winner.

Some tax certificates are not sold but are “struck off” in the name of the county. Certificates held by the county carry the mandated rate of 18%. They include:

• Certificates for which there was no bid
• Certificates for properties under bankruptcy
• Certificates for Homestead properties when the amount due is less than $100.

Tax certificates have a life of seven years, at which time they are deemed and held to be barred by the statute of limitations. Certificates are transferable to another party. A separate tax certificate is sold each year for the delinquent taxes from the previous year only. Therefore, over several years, multiple tax certificates may be sold. For instance separate certificates are sold for delinquent 2005 taxes and delinquent 2006 taxes.

The holder of a tax certificate is barred from contacting the property owner to encourage them to pay the lien. 

To redeem a certificate and satisfy the lien again the liened property, the total amount of the certificate plus the interest rate to date (interest at the bid rate) must be paid to the county, plus a $6.25 redemption fee. The county then remits the amount, less the redemption fee, to the certificate holder. If there are multiple tax certificates outstanding against a property, the property owner may selectively redeem one or more certificates. 

After two years and up to the seven years, the holder of an unredeemed tax certificate may submit an application for a tax deed. When submitting the application for a tax deed, the applicant must pay the redemption costs for all other outstanding certificates. For example, a person holding a tax certificate for 2005 taxes would have to pay the redemption costs for a certificate for 2006 taxes if held by another party. The applicant must also pay the Tax Collector a search fee and an application fee. Once the application for a tax deed has been received, the County Clerk’s office will advertise and hold a tax deed sale.

A tax deed sale is a public auction of the encumbered real estate. The minimum bid for the property is the total amount of all delinquent taxes, interest and fees paid by the certificate holder. For property assessed as homestead property on the latest tax roll, the minimum bid is total of delinquent taxes, interest, and fees plus one half the value of the homestead property as listed on the current year’s tax roll. The property owner can redeem a tax sale application at any time prior to the sale by paying all appropriate costs. The winning bidder is awarded title to the property via a tax deed issued by the county.

Bargains can be found. If nobody else bids, the certificate holder can walk away with the title. Mortgage holders typically have a representive at a tax deed sale authorized to bid up to the amount of the mortgage endebtedness (but not higher). If there is no mortgage or only a relatively small one, an astute investor can pick up a real bargain. Two adjoining commercial parcels on Palm Coast Pkwy totaling 5.23 acres were purchased a few years ago at a tax deed sale for under $200K.