Tax Lien Sales/Treasurer’s Deeds – Part I of II
If property taxes are delinquent, the county treasurer is authorized to sell the property for unpaid taxes. Delinquent real property taxes go to tax lien sale annually, generally toward the end of the year. At the tax lien sale, investors pay the delinquent amount due on a property, which grants the investor a lien on the property.
The tax lien sale allows the taxing authorities to receive their budgeted revenue without having to wait for the delinquent taxes to be collected. It also offers an investment opportunity to the general public, as individuals purchasing tax lien certificates can earn a potentially attractive interest rate on their investment.
The property owner has three years to redeem the tax lien before the investor is eligible to apply for a treasurer’s deed on the property. In addition to the amount of the delinquent taxes, the property owner pays an interest charge to the tax lien investor.
The tax lien sale is the final step in the treasurer’s efforts to collect taxes on real property. A tax lien is placed on each property in the county on January 1 each year and remains until the property taxes are paid. If the property owner does not pay the taxes on their property by a certain date, the county sells the tax lien at the yearly tax lien sale. The tax lien is auctioned to the highest bidder, who then becomes the tax lien certificate holder.
Often, the successful bidder must pay a premium price above the amount of the delinquent taxes and other costs in order to purchase the tax lien certificate. The premium paid does not earn interest and is not paid back by the property owner.
Interest is earned on the face amount of the certificate (again, not on any bidding premium paid) from the date of the sale to the date that the property owner redeems the certificate by paying the delinquent taxes, interest, and costs.
The property owner may redeem the property from the tax lien certificate holder at any time, from the day of the sale to the day that a tax deed is issued.
If the property owner does not redeem the property by paying the delinquent taxes, the tax lien certificate holder can pay the required costs and fees and apply for a treasurer’s deed after three years.
Tax lien sales in Colorado are auction-type sales and are governed by statute. C.R.S. 39-11-151(1)(b) states that no tax lien shall be sold to an elected or appointed county official, to a county employee, or to a member of the immediate family of such person or to the agent of any such county official or employee during the time the official or employee holds office or is employed. Interest rates are predetermined at the time of the sale and are also set by statute (C.R.C. 39-12-103).
A completed W-9 form is required to participate in a tax lien sale. In addition, the Internal Revenue Service requires counties to issue 1099-INT forms to tax lien buyers.
The tax lien sale is usually held in October or November. Actual dates vary by county.
Buyers pay the total advertised price consisting of tax, interest to the date of sales, and an advertising fee. They also pay a nominal certificate fee plus any premium bid. The person bidding the highest amount is issued a certificate of purchase. This is a negotiable document representing a recorded lien on the property.
The buyer does not recover the premium paid over the starting amount. The certificate earns interest at the rate stated on the certificate with portions of calendar months considered as whole months.
The redemption amount paid is the certificate amount (tax, interest, advertising, and fees), plus redemption interest (as determined at the time of the tax sale). Upon redemption, the treasurer notifies the buyer to return their certificate for payment of the certificate face value plus accrued interest. When a county holds a certificate for the purchaser, payment is often mailed immediately.
The owner, owner’s agent, attorney or assignee, or any person having a legal or equitable interest in the property may redeem the property by paying the back taxes, costs, and inters accrued. This must be done within three years. A redemption certificate is issued when the taxes are redeemed.
Disclaimer: This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is distributed with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal or accounting advice or other expert assistance is required, the services of a competent professional should be sought.
For more information about this or other title related issues please contact Bob Rulon, firstname.lastname@example.org or Trevor Theelke, email@example.com at Land Title Guarantee Company, 970.328.5068 or check the website at http://www.ltgc.com
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