Are you considering investing in Florida tax deeds? We don’t only offer tax deed title certification; we’re also consistently gathering Florida-specific information, statistics and legal insights for tax deed investors. Our attorneys recently produced this white paper outlining some of the statutes and case law regarding these properties which illustrate the unique opportunities that Florida tax deeds offer. Feel free to browse the entire document below or skim our summary!
The following summary is intended for general information purposes only. Please see the complete document above for all statutory and case law references.
There are many public services that necessitate the sale of tax deeds. Without property tax income, these services can suffer. Furthermore, neglected properties (as tax deeds often are) can blight the community in other ways both cosmetic and even dangerous in nature.
The tax deed sales process in Florida can occur after non-payment of property taxes reaches the two year mark. A tax lien certificate holder (an interest-only investor that fronts the back taxes of any given year of unpaid taxes) can then apply for a tax deed to cash in on their investment. Once the state processes the tax deed application, an auction means the eventual tax deed purchaser (seeking the actual real property) would begin their investment journey.
The county clerk is required to notify all interested parties (titleholders, major lienholders) and advertise the sale.
Savvy investors should always practice due diligence. There is tax-deed specific research to be done, and many county resources are available for this purpose from the property appraiser, tax collector, county clerk’s official records, and code enforcement. The majority of these county tools are online and easily accessible by the investor. GIS/map searches may also be available through the county or other search engines and sites. Some tax deed investors prefer to drive by and view the property themselves, but they must exercise caution not to trespass.
Once it’s time for the auction to commence, there are several things to keep in mind. For a non-homestead property, opening bids represent the back taxes to the county, any outstanding tax lien certificates and interest due to the certificate holders, and any costs or fees incurred by the county associated with bringing the property to sale. A homesteaded property’s minimum bid will be set based on aforementioned fees and 50% of the assessed value. Note: this can at times create a surplus to the back taxes, which is then potentially available to prior lien-holders or titleholders, i.e. prior owners.
Bidders are required to post a deposit before the auction begins. The highest bidder will have within 24 hours to pay for the remainder of the purchase price. If the bidder does not pay the outstanding balance or the sale is canceled for any reason other than redemption/other action on behalf of the prior owner, the property will be posted for sale once more within 30 days and re-advertised. If cancelation occurred due to the high bidder’s failure to pay or retraction of the bid, they will forfeit their deposit, and fees associated with the re-posted sale will be paid from its sum.
If a property does not receive any bids at an auction, and the certificate holder does not want to pay the cost of the re-sale, it will move to the county’s “lands available for taxes” list, or ‘list of lands’ as it is often referred to. At this time, investors will be able to purchase the property directly from the county clerk. If no buyers come forward within 3 years of the auction date, the property will escheat to the county. At this time, the property becomes free and clear of all liens, prior taxes, and certificates.
Sometimes investors will forgo bidding on certain properties or purchasing them from the list of lands due to the few encumbrances that survive the tax deed sale. There are a number of interested parties and liens that are extinguished by a tax deed sale (HOA/COA/handyman/mortgages). Those that remain can be a factor in a bidder’s decision.
Certain easements, such as those for conservation, drainage, and utilities will remain. Restrictions and covenants “run with the land” and thus remain and are enforceable. Land use, zoning, development restrictions, and community restrictions are all examples. County and other governmental municipal liens survive the tax deed sale. After putting the property into compliance, investors have the option to seek out a lien reduction and have a hearing with the special magistrate. Many counties will reduce these liens substantially once the property is back up to code.
Tax deed purchasers do have the option to seek payment of governmental liens from the surplus. Although HOA and COA liens and mortgages are extinguished, these lien-holders may also seek payment from a surplus generated.
Governmental mortgages also survive the tax deed sale, and if the surplus does not satisfy the lien, the new owner will be required to pay, assume, or negotiate the debt. Two governmental liens/loans that do not survive the sale but are entitled to a right of redemption period are the IRS (120 days) and the Small Business Association (1 year). Most tax deed purchasers wait out this time period before selling or substantially upgrading their properties, as while the chance of them seeking the property are low, it is possible.
After the sale, interested parties can challenge the validity of the tax deed itself, but there is no right of redemption period for prior owners in the State of Florida. Tax deed purchases receive immediate possession and the tax deed is not a transfer of title, but in fact a “new, original and paramount” title.
If possession is refused by a current occupant, the purchaser can apply to the court for a writ of assistance after 5 days’ notice to the person refusing to deliver possession. If the court finds for the applicant, an order is issued by the court directing the sheriff to put the purchaser in possession of the property.
Once they are in possession of the tax deed and free of any prior occupants, the tax deed owner can utilize or sell the property as they wish. However, a tax deed carries an inherently clouded title. The new owner has 3 options to alleviate the cloud and obtain title insurance after the sale in the State of Florida.
- 1) Wait out the statute of limitations to challenge the sale (4 years)
- 2) Initiate a quit title action suit (typically months-long process)
- 3) Use a tax deed certification service – Clear to Sell (that’s us)!
This cloud on title will prevent the property from being insurable on normal terms until cleared. While waiting for the statute of limitations to expire can clear this cloud, title insurers may still require curative work relating to the tax deed sale or the chain of title before providing title insurance. A quiet title action suit is the traditional way to clear this cloud, but can also bring unpredictable challenges, such as escalating timeline and cost as it proceeds such as legal fees accumulating, cost to serve prior owners and heirs, the the difficulty in serving or finding said individuals.
Alternatively, tax deed certification can be used to clear this cloud and obtain fully insurable title. If you’re a tax deed investor looking to avoid quiet title action, and sell for full fair market value, then you want sell your property with a warranty deed–specifically one with no underwriter tie-ins, no restrictions on future sales, and no exceptions to the tax deed sale! Only Clear to Sell can provide all of those benefits and do so in a 20 day time frame!
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