Tax Certificates
A tax certificate is paper or electronic legal document representing unpaid delinquent real property taxes. It is evidence of the loan you have made. Tax certificates are a FIRST lien against the property which means there are very few other claims against a property which would be paid before the tax certificate lien.
Tax certificates are for you to make money on the interest payment associated with the loan to pay off the taxes, not to own the property. If you are looking to own the property, you may want to look at the Tax Deed Sale instead.
The Tax Certificate and Tax Deed processes are defined in FL Statutes Chapter 197 TAX COLLECTIONS, SALES, AND LIENS (You can find them here: FS-197).
Tax Certificate Sale Background
Please note, this discussion is based on Pinellas County, other Florida counties are similar, however you should check dates, processes and systems for each as they will vary.
Real Estate Property taxes are sent out in November of the tax year. If paid in November, a 4% discount is provided to the owner, if paid in December, a 3% discount, Jan 2%, Feb 1%, Mar the amount specified. The property taxes become delinquent on April 1 and a 3% mandatory interest charge is added to the amount due at that time. If the taxes remain unpaid, the delinquent property will be advertised once a week for 3 consecutive weeks prior to the tax certificate sale and the advertising fee will be added to the tax bill.
The Tax Collector is required by law to hold a tax certificate sale on or before June 1 each year. If payment is not received by 4:30 p.m. on the business day immediately before the date of the certificate sale, a certificate will be issued and additional charges will accrue.
The tax certificate sale for delinquent 2021 taxes will be held online at lienhub.com on June 1, 2022. For answers to frequently asked questions, go to lienhub.com. (Hillsborough, Pinellas and Pasco all use lienhub, as well as many others. You can purchase tax certificates anywhere).
In Florida, the tax certificate DOES NOT convey property rights, think of the purchase of a tax certificate as a loan to the property owner. In return, the investor receives interest on the money loaned. The certificates are advertised once a week for three consecutive weeks before the auction.
Notices for Hillsborough, Pinellas and Pasco counties will be in the Business Observer, however the list of properties will also be listed on lienhub. (For Pinellas County it will be May 13 at 8:00AM).
How the sale works
A tax certificate is an enforceable first lien against the property for unpaid real estate taxes. The sale allows investors to purchase certificates by paying the tax debt. The sale is conducted in a reverse auction style with participants bidding downward on interest rates starting at 18%. The certificate is awarded to the bidder who will pay the taxes, interest and costs and accept the lowest rate of interest. If there are no bidders, the certificate is issued to Pinellas County at 18% annual interest. Tax certificates last for seven years, as long as no other administrative or legal proceedings exist.
Note: There are certain risks associated with the purchase of tax certificates. It is the sole responsibility of the bidder to research any tax lien certificates before bidding on them.
Paying taxes after the certificate sale
To redeem the certificate, the property owner or his representative, must pay the Tax Collector the delinquent taxes plus accrued interest, advertising costs and fees. Payment of delinquent taxes must be made with a cashier’s check, money order, cash or credit card. The amount due for delinquent taxes is determined by the date received by the Tax Collector and not the postmark. After payment is received and validated, the certificate holder is reimbursed the cost of the certificate plus interest and the lien against the property is removed.
If taxes remain unpaid, the certificate holder may file a tax deed application with the Tax Collector two years after the date of delinquency, but prior to 7 years. The property may be sold at a public auction conducted by the Clerk of the Circuit Court should the property owner fail to pay the tax debt.
The Auction
- The interest on a certificate ranges from 0% to 18%
- Simple interest accrues on a monthly basis
- The investor is guaranteed 5% over the life of the certificate, IF THE CERTICATE IS REDEEMED.
- Certificates are good for 7 years form the date of issuance, after that they are worthless.
Tax Certificate Process
- A certificate holder is not allowed to contact the owner of the property carrying the delinquent taxes.
- When the owner pays the delinquent taxes, the interest is calculated and a check is sent out with a notice to the certificate holder.
- The certificate can be sold and transferred to another name.
- After two (2) years from the date of the delinquency (April 1) but no longer than 7 years, the tax certificate holder can request a tax deed application. If you go past year 7, you can lose your money invested in the tax certificate.
- The applicant for the tax deed sales has to redeem, (pay off) any other Tax Certificates that are outstanding, so if there are multiple years of tax certificates, the applicant will have to pay all these off out of pocket before the property can proceed to a tax deed sale.
- If there are not bids at the tax deed auction the application gets the property. (This is not the norm, DO NOT count on this)
- BUYER BEWARE. Know what you are purchasing.
Example: So if you were to buy the tax certificate for a commercial building and were able to take over a property that contains contamination, the government does not care if you were the party that created the issue, you could be liable.
Online
Tax Certificates online (Pinellas, Pasco, Hillsborough) : Lein Hub
In a Proxy bid, you put in the lowest level you will go to, and the bid goes down in 0.25% increments automatically. If your minimum bid is hit, you are out. If the bidding stops before your minimum, you will win that certificate.
In a Direct bid, you bid directly for the tax certificate.
Please note, counties have minimum deposits to bid. For Pinellas county it is 10% of the intended purchase, (with a $2,000 minimum)
LeinHub Schedules for 2022 Tax Certificate Sales
Pinellas County 2022 Tax Certificate Sale Summary
Tax Deed Sale
A Tax deed sale is the auction of real property on which tax certificates have been sold by the Tax Collectors’ Office for delinquent real estate taxes. Between years 2 and 7 of ownership of the certificates, the holder can apply for a Tax Deed Sale if it has not already been redeemed by the property owner.
Tax Deeds
- All tax deeds are issued by the clerk of the county, with a Tax Deed, you become the owner of the property.
- No right, interest, restriction, or other covenant shall survive the issuance of a tax deed, except –
- Liens held by a municipal or county governmental unit, special district or community development district, shall survive the issuance of a tax deed. This would include CDDs and PACE loans.
- If the HOA or Condo Association have been properly noticed, those go away, as well as a first mortgage, second mortgage, mechanics liens. The key is properly noticed.
Benefits of Tax Deed Sale
- Grantee of tax deed is entitled to immediate possession
- Reimbursement required in challenges to the validity of a tax deed.
Quiet Title Action
Any grantee under any tax deed issued by the state, may maintain an action in court to quiet title to the land included in the tax deed, or so purchased against the holder of the recorded title to the land, and against any other person or corporation claiming any interest in the land or any lien or encumbrance thereon. The quiet title action could take up to 6 months to complete. If you hold the property for 4 years, then the quiet title action occurs statutorally. Always work with an attorney for quiet title actions. You are not likely to get title insurance to sell a tax deed property until quiet title is done.
Sale at Public Auction
- The minimum bid will be the amount required to redeem the tax certificate.
- The auctions are conducted online (see below)
- The balance of payment, plus any fees are due from the winning bidder and must be received by the Clerk and Comptroller within 24 hours of the auction. Be very aware of the timeline as failure to perform can be expensive and result in the loss of your deposit and no property.
- If there are bids higher than the minimum, the property shall be struck off and sold to the certificate holder
- If you win no bids, your funds will be refunded to you, it may take few weeks.
Participating in a Public Auction
- Parcel Number -the Property Appraiser information for the property.
- Tax Collector –
- Auction close time
- Auction clock
- Proxy Bid -Proxy bidding allows you to enter your Maximum Bid amount for a particular tax deed.
For Example, if the opening bid for a tax deed is $17,050 and a bidder enters a “Maximum Bid” of $30,000, the system will enter an opening bid on behalf of that bidder in the amount of $17,100. As necessary, the system will bid on your behalf in $100 increments until it reaches your Maximum Bid.
- Proxy Bidding eliminates the need to monitor each tax deed, you can submit your Maximum Bid and let the system bid on your behalf. Recognize that bidders usually have a minimum deposit required, which can be up to 10% of the highest bid for each property you may be bidding on.
- Read all rules carefully regarding the payment of balances due should you be the winning bidder. The balance of payment (the outstanding tax amount) is usually due within 24 hours. Failure to fund the purchase in a timely fashion will result in loss of your deposit. The attached information brochure for Pinellas county also explains the process.
Tax Deed Sale Sites
Pinellas County: pinellas.realtaxdeed.com
Hillsborough County: hillsborough.realtaxdeed.com
Pasco County: pasco.realtaxdeed.com
Summary
Tax Certificates are essentially loans you are making to the county to pay off delinquent taxes. You are paid interest on the loan amount of an amount determined by your bid. Be aware that the timeframe for that payback is not a given and can be a few months, or years, and it can require you to apply for a tax deed sale to make it happen.
The Tax Deed sale occurs when the owner of a tax certificate applies for it, which can be no sooner than 2 years after the delinquency, but no more than 7 years. If you go past the 7 year mark, you forfeit your loan. While it is possible for you to acquire the property at the tax deed sale for the amount of the outstanding tax delinquencies, it is very unlikely, as tax deed sales are competitive. Properties acquired via tax deed sales may have issues and are not purchased free and clear, so do your due diligence.
It is wise to engage with attorneys and CPAs to understand the process and for general counsel on such purchases. This article provides no legal advice, but rather simply tries to explain these two procedures.
