When Indiana landowners fail to pay property taxes, their property may be subject to a county tax sale. Tax sales serve as an important mechanism for counties to recover tax revenue from real property that is months, and sometimes years, delinquent in payments. Tax sales can also present an opportunity for real estate investors to purchase real estate at very favorable prices. However, the process of purchasing property at tax sale is complex, and without specific adherence to the requirements of Indiana law, the purchase may not go as planned. If you have considered investing in property at an Indiana tax sale but are not sure how to secure your investment, our team of attorneys at Burke Costanza & Carberry can help you through the process.
The Indiana Tax Sale Process
Most Indiana counties host tax sales on a routine basis, often multiple times per year. There are two kinds of tax sale, Treasurer’s tax sales and Commissioners’ tax sales. In a Treasurer’s tax sale, Indiana counties seek to recover the full balance of delinquent taxes owed for a particular property. Before a Treasurer’s sale takes place, a county will send notices to property owners who are delinquent on their property taxes, notifying them of their delinquent taxes and the potential for an impending tax sale. If a landowner fails to pay the full amount of property taxes owed before the sale, the county will attempt to auction the property to interested bidders. Tax sale bidding starts at the amount of unpaid taxes owed on the property, and the highest bidder is awarded a tax lien on the property (a tax sale certificate). It is important to note that this lien does not grant immediate ownership of the property. Rather, it gives the winning bidder the opportunity to obtain title to the property if the tax-delinquent owner fails to pay the back taxes owed, along with added interest and costs related to the sale, within a specified time period (the “redemption period”). In the event the property owner is able to redeem the property, the tax sale purchaser may receive their initial investment in the tax sale certificate back from the county, as well as some or all of their expenditures related to the sale and interest on the underlying tax debt that accrued since the sale. If the property owner fails to redeem, the tax sale purchaser can petition a local court to grant them a deed to the property. Thus, tax sales can offer investors the opportunity for a return on their investment in the form of interest earned during the redemption period or the acquisition of real estate at a favorable price.
Not every property offered will be sold at a Treasurer’s sale. If no tax lien is awarded for a particular property due to a lack of bidders, the tax-delinquent owner maintains ownership to the property, but it may be subsequently offered for auction at a Commissioners’ sale. Although the process is similar for Commissioners’ sales, there are important differences between Treasurer’s and Commissioners’ sales, one of which being that bidding at a Commissioners’ sale may start even lower than the amount of the unpaid property taxes. However, it is important to consider that there may be reasons the property did not sell the first time it was offered! Some properties are in significant states of disrepair or may have other conditions making them less desirable investments.
The Redemption Period
After purchasing the tax sale certificate for a particular property, it is essential that the lienholder diligently and timely comply with Indiana law to carry out the necessary steps during the redemption period to protect their investment. For example, if the tax sale purchaser wishes to recoup costs they have incurred related to the sale, such as attorney fees and the costs of a title search, such expenses must be timely reported to the county prior to any redemption. Most importantly, however, a winning bidder must provide proper and timely notice of the tax lien and the right to redeem the property to the tax-delinquent property owner and any other persons or entities with an interest in the property. For a Treasurer’s sale, this notice will inform the property owner that they have one year, beginning from the date of sale, to redeem their property. For a Commissioners’ sale, the property owner must be notified that they have only 120 days to redeem their property. Failure to provide such notice in a timely manner, or failure to notify all necessary persons with an interest in the property, could prove fatal to the tax sale purchaser’s efforts to obtain a tax deed.
Obtaining a Tax Deed and What Comes Next
If a landowner fails to redeem their property within the applicable redemption period, the tax sale purchaser may petition the local court to obtain a tax deed to the property. The tax-delinquent property owner must also receive notice that such a petition has been filed. Finally, if the tax sale purchaser complied with all necessary procedures, and can present evidence of this to the court, the court can order that the county issue a tax deed to the purchaser.
Just getting a tax deed might not be the end of the story, however. Throughout the tax sale process, tax-delinquent property owners have the opportunity to present legal objections to the process itself, which may take a variety of forms but which often pertain to the question of whether the relevant notices were properly sent or delivered. Such objections are occasionally raised even after a tax deed has been granted to the purchaser and may result in complicated litigation. Purchasers may also find that the property to which they have just acquired a deed still has a tenant or former owner living in it who has no interest in leaving, which may necessitate eviction proceedings. Moreover, many purchasers who wish to “flip” their newly acquired properties discover that title companies often have additional requirements for tax sale properties that need to be satisfied before they can offer the title insurance needed for a subsequent sale. Such complications can usually be overcome with legal assistance.
Despite the complexities and risks of the tax sale process, many find the purchase of tax liens to be a worthwhile endeavor, when done properly. The attorneys of Burke Costanza & Carberry have extensive experience guiding clients through this process and assisting after the acquisition of a tax deed. If you have made a property investment through an Indiana tax sale, or are considering taking the plunge, our team at Burke Costanza & Carberry is there to help.
– This post was co-authored by Kallee M. Sears