Introduction
In the state of Florida, property owners are required to pay property taxes annually. These taxes are used to fund public services such as schools, infrastructure, and emergency services. When property owners fail to pay their taxes, the state has the authority to sell tax liens or deeds on the property to recover the owed taxes. This article will explore the laws and procedures for tax liens and deeds in Florida and discuss the opportunities and risks associated with investing in these properties.
Understanding Tax Liens and Tax Deeds in Florida
What Is a Tax Lien?
A tax lien is a legal claim by a government entity against a property due to unpaid taxes. When property owners in Florida fail to pay their property taxes by a specific date, the county can issue a tax lien certificate for the amount of the unpaid taxes, including interest and other costs.
What Is a Tax Deed?
A tax deed represents ownership of a property that has been seized by the county due to unpaid taxes. If the taxes are not paid after a tax lien certificate is issued and remains unresolved for a specified period, the county can foreclose on the lien and sell the property at a tax deed auction.
Laws Governing Tax Liens and Tax Deeds in Florida
Florida Statutes on Tax Liens
Florida’s laws regarding tax liens and deeds are primarily found in Chapter 197 of the Florida Statutes. According to these statutes, the tax collector in each county is responsible for issuing tax lien certificates on properties with unpaid taxes. The tax certificates are sold to the highest bidder at an auction.
Redemption Period and Interest Rates
After a tax lien certificate is sold, the property owner has a redemption period during which they can pay the delinquent taxes, plus interest and fees, to redeem the property and remove the lien. In Florida, the redemption period is two years. The interest rate on the tax certificate is determined at the auction but cannot exceed 18% per year.
Tax Deed Sale
If the property owner does not redeem the property within the redemption period, the certificate holder can apply for a tax deed. This leads to a tax deed auction where the property is sold to the highest bidder. The proceeds from the sale are used to pay off the tax lien, and any excess funds are returned to the original property owner.
Procedures for Buying Tax Liens and Tax Deeds in Florida
Participating in a Tax Lien Auction
Tax lien auctions are typically held online or in person, depending on the county. To participate, investors must register with the county tax collector’s office and deposit funds to cover their bids. During the auction, tax certificates are sold to the highest bidder, who then becomes the lienholder.
Participating in a Tax Deed Auction
To participate in a tax deed auction, investors must register and deposit funds with the county tax collector’s office. The auction is held after the lienholder applies for a tax deed and the county issues a notice of sale. Properties are sold to the highest bidder, who then becomes the new owner of the property.
How to Buy Tax Deeds in Florida
- Research: Before participating in a tax deed auction, investors should research the properties available for sale. This includes reviewing the property’s legal description, assessing its condition, and estimating its market value.
- Registration: Investors must register with the county tax collector’s office and deposit funds to cover their bids.
- Bidding: During the auction, investors bid on properties. The highest bidder wins the property and must pay the bid amount within a specified time frame.
- Closing: After the auction, the winning bidder must complete the necessary paperwork and pay the balance of their bid to receive the tax deed.
Opportunities and Risks of Investing in Tax Liens and Tax Deeds
Opportunities
- High Returns: Investing in tax liens can yield high returns, as the interest rate on tax certificates can reach up to 18% per year.
- Potential for Property Acquisition: If the property owner fails to redeem the property, the lienholder can acquire the property at a tax deed auction, potentially at a price below market value.
- Diversification: Tax liens and deeds can provide an alternative investment opportunity for investors looking to diversify their portfolios.
Risks
- Property Condition: Investors may not have the opportunity to inspect the property before purchasing the tax deed, which can lead to unexpected repair or maintenance costs.
- Legal Issues: There may be legal issues or other liens on the property that could affect the investor’s ability to take ownership or sell the property.
- Market Fluctuations: The value of the property may decrease due to market fluctuations, impacting the investor’s return on investment.
FAQs
Can Someone Take Your Property by Paying the Taxes in Florida?
Yes, if you fail to pay your property taxes, the county can issue a tax lien on your property. If the lien remains unpaid, the property can be sold at a tax deed auction, and the new owner can take possession of the property.
If I Buy a Tax Deed, Do I Own the Property?
Yes, if you purchase a tax deed at an auction, you become the new owner of the property. However, you may need to take additional legal steps to obtain clear title to the property.
How Do I Find Tax Lien Properties in Florida?
Tax lien properties can be found through county tax collector’s offices. Many counties provide online databases or listings of properties with tax liens.
Conclusion
Investing in tax liens and tax deeds in Florida can be a lucrative opportunity for those willing to navigate the laws and procedures involved. While there are risks associated with these investments, the potential for high returns and property acquisition makes them an attractive option for many investors. As with any investment, it is crucial to conduct thorough research and consult with legal and financial professionals before participating in tax lien or tax deed auctions.