Understanding How Florida Tax Certificates and Tax Deeds Work

If you own your home or other real estate in Florida, you know that you are required to  property taxes each year. Property taxes are normally due on November 1. If they go unpaid, they are considered delinquent on April 1 of the following year. At that point, local tax collectors will conduct what is known as a “tax certificate sale” on the following June 1.

A tax certificate is basically a lien against your property. The certificates themselves are sold at auction. The bidder must pay the delinquent taxes plus costs. The successful bidder is the one who will demand the lowest interest rate on the certificate from the delinquent property owner. To redeem the tax certificate, the property owner must therefore pay the face amount–i.e., the unpaid taxes–plus the winning interest rate.

If the property owner fails to redeem the tax certificate within two years, the holder may auction off the property. This requires the certificate holder to apply for a tax deed. After the tax deed is filed, the local court clerk will conduct an auction of the property itself.

By law, the tax certificate expires 7 years after it is issued. So if the certificate holder fails to apply for a tax deed on an non-redeemed certificate within that time, they are out of luck.

Bankruptcy Court Rules Creditor’s Tax Certificates Expired Due to Inaction

But what happens if the property owner files for bankruptcy? How does that affect the passage of time on a tax certificate? A recent Chapter 13 bankruptcy case from Tampa examined this issue in some detail. Here is what the court found.

The debtor in this case owns property in Bradenton. He failed to pay his 2008 and 2009 property taxes. A company called Propel Financial subsequently won the auctions for the tax certificates on the property.

In April 2011, Propel sought a tax deed for the still-unredeemed 2008 certificate. The clerk scheduled a sale of the property for August 2011. The day before the sale, however, the debtor filed for Chapter 13 bankruptcy. This forced a cancellation of the sale. But 10 months later, the bankruptcy court dismissed the debtor’s Chapter 13 case when he could not confirm a repayment plan.

Although there was nothing stopping Propel from initiating a new tax deed at this point, the creditor took no action for the next 6 years. It was not until January 2019 that it applied for a new tax deed. History then repeated itself. The clerk scheduled another tax deed sale. And just before that sale took place, the debtor again filed for bankruptcy.

Propel argued that even though its most recent tax deed filing occurred more than 7 years after receiving its tax certificate, it maintained that deadline should not apply based on its 2011 tax deed application–i.e., the sale that had to be aborted due to the debtor’s first bankruptcy filing. The bankruptcy judge agreed with Propel that the 7-year clock was stopped or “tolled” during the first bankruptcy case. However, even taking this stoppage time into account, Propel still failed to “reapply for a tax deed application within the seven-year limitations period.” Its tax certificates–and thus its lien on the debtor’s property–had legally expired.

Speak with a Florida Bankruptcy Attorney

If you have fallen behind on your mortgage or property taxes, filing for bankruptcy will not eliminate these debts. But bankruptcy can buy you time to help get your financial affairs in order and save your home. To speak with a qualified Miami Chapter 13 bankruptcy lawyer about your options, contact the Law Office of Julia Kefalinos today at 305-676-9545 to schedule a free consultation.

Source:

scholar.google.com/scholar_case?case=9443740124117675126