Can a Municipality Make a Profit by Selling my Property After a Tax Lien Foreclosure?
Prior to 2015, the answer was always yes. Regardless of the amount received at the sale, any proceeds on properties sold in a tax lien foreclosure belonged to the municipality. If your outstanding taxes and fees were $5,000 and the City sold your home for $25,000, they kept the excess.
However, in 2015, a new law was enacted. It allowed a city or town to adopt an ordinance authorizing the municipality to disburse the “excess of any funds” received from the sale of the property following the tax lien foreclosure process to the former property owner. “Excess of any funds” is defined as:
The amount obtained by the municipality for the disposition of property, less:
- All taxes and interest owed on the property, and the amount of taxes and interest that would have been assessed had the property not been acquired by the municipality;
- The municipality’s cost of the lien and foreclosure process;
- The municipality’s cost of maintaining and disposing of the property; and
- Unpaid sewer, water, or other charges and fees imposed by the municipality or quasi-governmental authority.
If you have tax liens on your property, check what ordinances your municipality has enacted. These ordinances will determine what happens to any excess proceeds following the sale. If you are a municipality, now may be the time to review or enact such an ordinance. If you have questions on how to enact a similar ordinance, or are a property owner and have questions about these ordinances, please contact Rudman Winchell.