Pitfalls and Challenges in Obtaining a Tax Deed

Pitfalls and Challenges in Obtaining a Tax Deed

Most properties sold at the annual tax sale result in redemption. “Redemption” is the formal name for the repayment of the unpaid taxes by the owner or interested party. Depending on your investment strategy, you may be looking for properties which are likely to redeem or properties which may not redeem. In either case, the process for obtaining the tax deed is the same but it does come with different risks. Like all investments, the amount of risk you are willing to take will dictate the potential return.

The Property Tax Code provides the rules for obtaining a tax deed. The courts require strict compliance with the provisions of the code which outline the procedure for obtaining a tax deed. Because a failure to follow those provisions may result in an inability to obtain a tax deed, individuals should consult with an attorney once they purchased a tax lien. Statutory requirements begin shortly after the tax lien sale so do not wait to understand your obligations under the code.

The redemption period is a statutorily defined period of time in which an interested party can submit the unpaid taxes and penalties to the county clerk thereby redeeming the tax lien. The tax buyer cannot obtain the tax deed until that time period is over. The length of time depends on several different factors including property zoning and improvement status. Once a tax lien is purchased, you must know the redemption period to begin the process for obtaining a tax deed. Waiting to identify the appropriate redemption period can be fatal to obtaining a tax deed.

The redemption date is the last date in which an owner can pay unpaid taxes and redeem the property. That date sets a strict timeline that the tax buyer must follow to obtain a tax deed. The process for obtaining a tax deed begins with a written notification delivered by the county clerk shortly after the tax lien sale and concludes with the application for tax deed hearing in which the circuit court orders the county clerk to issue a tax deed to the tax buyer.  In between are a variety of steps which include an extensive search of the property records to identify all interested parties and a variety of notification methods to inform those interested parties in the potential tax deed.

As discussed earlier, once that tax deed is issued to the tax buyer, an interested party losses their rights to the property. This includes mortgage lien holders, mechanics lien holders, potential property heirs, family members with an expectancy interest and others. The law provides protections for interested parties, but you must act to enforce those protections.

For you, as a tax lien buyer, to avoid disputes over the tax deed, you must strictly conform with the law. “Strictly conform” means the actions you take must not merely address the spirit of the law, or accomplish the same goal as the law, the action must be done exactly as the law proscribes.  That burden is difficult to assess for things such as your “reasonable efforts” to identify all interested parties.  When the statutory language provides clear guidelines, strict compliance is relatively easy. But when the statutes language requires your actions be “reasonable”, you must look to case law to identify what ‘reasonable efforts” mean. You simply can not use your own judgment as to what a “reasonable effort” entails in order to plan what actions you are going to take. Without the guidance of an attorney, you risk making mistakes which may make your investment worthless.

Tax buyers looking to pursue obtaining a tax deed should contact our office to discuss the process and how we can ensure you receive the tax deed. The earlier in the process we get involved the better the result.

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