Posted on Monday, February 14, 2011
Tax certificates and tax deed sales are governed by the Florida Statutes, Title XIV,
Chapter 197, “Tax Collections, Sales, and Liens.”
I. Tax Certificates Generally
Property taxes become due on November 1 in Florida, and are delinquent if not paid by
April 1 of the following year. In March, the Tax Collector sends out reminder notices to all
unpaid accounts, and then prepares a list of delinquent taxes in May to be posted in newspapers
and online. The state holds a tax lien on any property with delinquent taxes, and this lien runs
with the land.
A tax certificate is a legal document that represents this tax lien, which the state can then
sell to private investors. Tax certificates are a first lien against a property and are superior to
all other competing liens. The tax certificate is purchased through an auction process, as
described below, and the face amount it is bought for is made up of the following costs:
1. The delinquent real estate tax amount,
2. Interest (1.5% per month for April and May on the delinquent amount),
3. Tax Collector’s commission (5% on the delinquent amount), and
4. The advertising charge of the newspaper.
II. Auction of Tax Certificates
After April 1, and once notice has been provided to all property owners regarding unpaid
tax amounts, the Tax Collector holds tax certificate auctions, as governed by § 197.432. A tax
certificate auction allows individual investors to bid on tax certificates and, if successful, acquire
an interest-bearing lien on the property encumbered by the tax lien. It is worth noting that this
interest-bearing lien does not grant the holder of a tax certificate any property rights in the
encumbered property. However, assuming the tax certificate is not redeemed by the property
owner owing taxes, a certificate holder can apply for a tax deed, a process which will be covered
in more detail in the following section.
Tax certificate auctions utilize a bidding procedure whereby investors, in increments of
one-quarter of one percent, bid down the interest that will be charged on the tax certificate. The
bidding starts at 18 percent: the maximum interest rate allowed by Florida law to be charged on
tax certificates. Essentially, the tax certificate goes to the investor who is willing to pay the face
value of the certificate and charge the lowest rate of interest. In the event that there are no
bidders in an auction, a tax certificate is issued to the county in which the auction is taking place
at 18 percent interest.
A tax certificate has a life of seven years, unless the owners of the encumbered property
declare bankruptcy, in which case the limitation of life on the certificate can be tolled. Northcutt
v. Balkany, 727 So.2d 382 (1999). Tax certificate holders under Florida law are “creditors” of
debtor-taxpayers with standing to file a claim. Although a certificate holder does not have a
claim against a debtor as an individual, the certificate holder nonetheless has a secured claim
with enforceable rights against debtor’s estate. In re Lago, 301 B.R. 365 (S.D. Fla. 2003).
III. The Tax Deed Sale Process
The holder of a tax certificate may apply for a tax deed after two years have elapsed from
April 1 of the year of issuance of the tax certificate. § 197.502. However, during that two year
period, the owner of the certificate may not make any contact with the owner of the property,
pursuant to § 197.432(14). The owner of a property encumbered by a tax certificate may, at any
time before the issuance of a tax deed, “redeem” a tax certificate by paying the total taxes due on
the property plus all interest accrued.
A. Applying for a Tax Deed
Assuming that a tax certificate is not redeemed, and once the two year period has passed,
the owner of a tax certificate may apply for a tax deed by performing the following steps: (a)
submit a signed application, (b) pay all amounts required to redeem all outstanding tax
certificates not owned by the applicant, (c) if due, pay current taxes, and (d) pay fees for a title
search, the application, and for the Clerk of Circuit Court’s services. § 197.502. Subsequent to
the application being filed, the Clerk of Circuit Court will notify the applicant of the date of the
sale and will assess the applicant additional costs for advertising, mailing, and a sheriff’s fee.
According to the Hillsborough county website, the sale will take place around two to three
months after these notifications are sent.
B. Notice Requirements
Before a property can be subjected to a tax deed sale, two different notice requirements
must be satisfied:
1. Pursuant to §§ 197.512 and 197.402, the Clerk of Circuit Court
must publish a notice of tax deed sale, once a week, for four weeks in a
newspaper distributed in the county where the property is located.
2. Pursuant to §§197.522 and 197.502, the Clerk of Circuit Court
must notify any owner, mortgagee, or lienholder of the encumbered property of
the impending tax deed sale.
The latter requirement has been subject to increased scrutiny over the last five years
as courts attempt to interpret what constitutes sufficient notice. Under §197.522, a County
Tax Collector must search the county's official real estate records to identify legal title
holders of record, mortgagees, and other persons who are entitled to receive notice of the tax
deed sale. The tax collector also must use the property appraiser's latest assessment roll to
identify the person to whom the property in question was last assessed, who is also entitled
to notice. Once it is established who must be given notice, the Tax Collector has to prepare a
statement identifying those persons and their addresses. From here, the Clerk of Circuit
Court sends notice of the upcoming tax deed sale by certified mail, return receipt requested,
to all parties identified in Tax Collector’s statement.
Although these steps effectively summarize the statutory requirements for notice of tax
deed sale, there are due process requirements that must be taken into consideration as well,
starting with those imposed by the Supreme Court in Jones v. Flowers, 547 U.S. 220 (2006).
Flowers stated that reasonable additional steps needed to be taken by the government where
notice of a tax sale was returned as undelivered to a property owner. The Court did not specify
what “reasonable additional steps” needed to be taken, but many appellate courts have suggested
that simple Internet searches would probably be enough. Additionally, the Florida Supreme
Court held that notice of a tax deed sale did not satisfy due process requirements where a clerk
knew or should have known that notice was sent to an incorrect address. Vosilla v. Rosado, 944
So. 2d 289 (Fla. 2006). Vosilla states that steps undertaken by the state when notifying a
property owner of an impending tax deed sale must be reasonably calculated to reach the titleholder
under the totality of the circumstances.
C. The Tax Deed Sale
The property is sold to the highest bidder at a public sale, with the opening bid’s value
depending on whether the property being sold is a homestead. For properties that are not
homesteads, the opening bid is set at the cost of all delinquent taxes plus interest. For properties
that are homesteads, the opening bid is set at the cost of one-half the assessed value of the
homestead property, in addition to all delinquent taxes plus interest. If a non-homestead property
does not sell at the public sale, then the applicant is required to take deed to the property. In the
event that a homestead property does not sell, then the applicant must pay the additional one-half
assessed value if he or she wishes to take deed to the property. If the applicant chooses to not
take deed to the property, it is then entered into the List of Lands Available for Taxes. Property
not purchased from this List of Lands within 3 years will escheat to the county, resulting in the
applicant’s investment being completely lost. § 197.542.
The purchaser and owner of a tax deed takes title to the property free and clear of all
other liens, with the limited exception of certain governmental liens as provided under
§ 197.552. The grantee of a tax deed is entitled to immediate possession. § 197.562.