Topic:
FORECLOSURE; TAXATION (GENERAL); LIENS; PROPERTY TAX;
Location:
TAXES - PROPERTY;

OLR Research Report


December 6, 2004

 

2004-R-0900

ACQUIRING A PROPERTY FOR BACK PROPERTY TAXES

By: Kevin E. McCarthy, Principal Analyst

You asked how a municipality can acquire a property for back taxes and sell it to a new owner.

SUMMARY

Unpaid property taxes are a lien on the property. An owner can discharge the lien by paying the back taxes, plus applicable interest, charges, and fees. Alternatively, the lien is also discharged if the chief executive of the municipality abates the taxes.

If the lien is not discharged, the municipality can foreclose on it. If the property's fair market value is more than $100,000 or more than the value of the lien plus interest, charges and fees, the foreclosure goes through the courts. If the property is worth less, the municipality can use a summary foreclosure process. Under both procedures, a property owner can redeem the property by paying the back taxes, interest, charges and fees.

If the property is not redeemed, the foreclosing municipality takes possession of and title to the property. In addition, the property owner can transfer the deed to a liened property to the municipality in lieu of foreclosure. In either case, the municipality can dispose of the property as it sees fit, including selling it to a third party.

ACQUIRING A PROPERTY FOR BACK PROPERTY TAXES

Creating and Discharging a Lien

Unpaid property taxes are a lien on the property under CGS 12-171 et seq. The lien takes precedence over other liens and is originally valid for one year. The municipal tax collector can continue a tax lien to secure the payment of the tax, plus interest, fees, and charges, by filing a certificate with the town clerk. The certificate must list the taxpayer's name, describe the property, and indicate the amount of back taxes due and when they became due. The certificate must also include a notice to the owner of the municipality's intent to file a lien on the property.

The owner can discharge the lien by paying the back taxes, interest, fees, and charges. The lien can also be discharged if the chief executive of the municipality has abated the tax. The lien becomes invalid after 15 years unless the municipality starts a suit to foreclose it.

Foreclosing a Lien

Standard Foreclosure. If the lien is not discharged, the municipality bring suit to foreclose the lien. If there are back taxes owed to more than one municipality (e.g., the owner owes taxes on the property to a town and a special district), all of the municipalities can join the suit. The court can limit the time in which the property owner can redeem the property (i.e., recover the property by paying off the back taxes, interest, fees, and charges), order the sale of the real estate, and make other orders that it judges to be equitable.

Summary Foreclosure. If (1) the property has a fair market value of up to $100,000 in the tax collector's judgment and (2) the amount of tax liens is greater than the fair market value, the collector can bring an action for summary foreclosure of the lien. The tax collector can, up to twice each year, file a petition with the Superior Court, which can list multiple properties that meet these criteria. The petition must describe each of the properties with tax liens; provide the name and address of their owners; specify the amount of back taxes, interest, fees, and charges owed for each property; identify each person with an interest in or encumbrance on each property, and the nature and amount of each interest or encumbrance as described in the land records. The petition must also note the last day the property can be redeemed, which must be the last day of the fourth month following the month that the petition is filed.

Within two weeks after the petition is filed, the court must appoint two disinterested appraisers. They must appraise the property's fair market value within 30 days of their appointment. If the appraisers' report shows that a property is worth more than (1) $100,000 or (2) the amount due on the tax liens plus any other encumbrances, the town clerk must withdraw such properties from the foreclosure proceeding.

When the list has been edited, the clerk must notify the tax collector of this fact and the collector must publish a notice in a local newspaper of the fact that a foreclosure proceeding is pending. The collector must also post this notice at town hall and send a copy of the notice to the property owner by registered or certified mail.

The property owner or anyone else who has an interest in or encumbrance on the property (e.g., a bank holding a mortgage on the property) can file a notice with the court clerk raising a bona fide defense to the foreclosure. This notice must be filed no later than three months before the end of the redemption period. If the court is satisfied that there is a bona fide defense to the foreclosure, it must direct the town clerk to withdraw the property from the proceeding.

Any person who has a title to or an interest in the property can redeem it by paying off the lien amount, plus any interest, fees, or charges that accrued after the petition was filed. If no one redeems the property, the court must make a final judgment giving the municipality possession of and the title to the property. Any person who had any right, title, or interest in the property is thereafter barred from claiming it.

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