How to Buy Delinquent Property Taxes in Kentucky
Unlock the potential of tax lien investments in Kentucky. This guide simplifies the process of acquiring and managing delinquent property tax certificates.
Delinquent property taxes in Kentucky present an opportunity to acquire tax lien certificates, known as certificates of delinquency. This process involves a legal framework designed to encourage timely tax payment and provide a pathway for investors. Understanding the specific procedures and requirements is essential for participation in this specialized market.
Understanding Kentucky Tax Lien Sales
In Kentucky, a property tax becomes delinquent if it remains unpaid after December 31st of the year it is due. A lien immediately attaches to the property, including the original tax amount, accrued interest, penalties, fees, and administrative costs. This lien is held by state and local taxing districts for up to eleven years until the debt is resolved.
On April 15th of the following year, uncollected tax bills are transferred from the sheriff’s office to the county clerk’s office, officially becoming certificates of delinquency. County clerks then offer these certificates for sale to third-party purchasers, primarily through annual public auctions. These sales usually commence in mid-July and continue through late October, with most occurring in July and August. Unsold certificates may be available for over-the-counter purchase after the initial auction.
Preparing for a Tax Lien Purchase
Before participating in a tax lien sale, thorough research of delinquent properties is necessary. County clerks are required to advertise tax sale details and certificate listings in local newspapers at least 30 days prior to the sale date. This information is also commonly available on the county clerk’s website. Prospective purchasers should review these listings to identify properties of interest and assess their potential value and any associated risks.
Specific registration requirements apply to potential bidders. Individuals or entities planning to acquire more than three certificates of delinquency in a single county, or more than five certificates statewide, or intending to invest over $10,000, must register with the Kentucky Department of Revenue. Individual county clerks may also have their own specific registration processes. Prepare any necessary pre-sale documentation and ensure access to certified funds, such as cashier’s checks or bank checks, as credit cards are generally not accepted for these purchases.
Participating in a Tax Lien Sale
The purchase of a tax lien certificate in Kentucky typically occurs through an annual public auction conducted by the county clerk. Kentucky employs a premium bid method where bidding begins at the total amount of delinquent taxes, including all accumulated penalties, interest, and administrative costs. The highest bidder secures the certificate of delinquency.
The process for selecting which certificates are offered to bidders is often determined by a random drawing at the outset of the sale. Immediate payment is generally required once a bid is successful. Accepted payment methods typically include cash or cash equivalents like cashier’s checks, bank checks, or online payments, as credit cards are not universally accepted. The purchaser receives the certificate of delinquency, which serves as official documentation of the acquired tax lien.
Managing Your Tax Lien Certificate
Once a certificate of delinquency is purchased, the property owner has a period to redeem the property by paying the outstanding taxes and associated costs. This redemption period for the property owner is generally one year from the date the taxes originally became delinquent. During this period, the tax lien accrues simple interest at a rate of 1% per month, equating to 12% per year, on the amount paid for the certificate.
As the lienholder, there are specific notification requirements to fulfill. Within 50 days of purchasing the certificate, the new lienholder must send notice to the delinquent property owner. This notice must clearly state that a certificate of delinquency is now a lien against the property, specify the 1% monthly interest accrual, explain the potential for foreclosure if the debt is not paid, list the total amount due, and inform the property owner about options for an installment payment plan if the purchaser was required to register with the Department of Revenue. These notifications must continue annually until a foreclosure action is initiated.
If the property owner fails to redeem the certificate within the statutory period, the lienholder may then initiate a legal action to foreclose on the property, typically one year after the taxes first became delinquent. If the property is not sold at the foreclosure sale, the Master Commissioner may issue a deed to the certificate holder, transferring ownership of the property. An additional 60-day redemption period may apply if the property sells for less than its assessed value at a foreclosure sale.