How to Buy Tax Lien Certificates in Florida
A comprehensive guide to understanding, acquiring, and managing Florida tax lien certificates.
In Florida, property owners are required to pay real estate taxes annually to fund local government services. When these property taxes become delinquent, county tax collectors initiate a process to recover unpaid amounts. This process involves the sale of tax lien certificates, which represent a claim against the property for overdue taxes. This article outlines the steps involved in purchasing tax lien certificates within Florida’s regulatory framework.
Understanding Florida Tax Lien Certificates
A Florida tax certificate is a lien placed on a property for unpaid real estate taxes, not a direct property purchase. County tax collectors issue these certificates to recover delinquent property taxes and non-ad valorem assessments. Florida Statutes require their sale by June 1st each year for the preceding year’s delinquent taxes. The certificate amount includes unpaid taxes, penalties, advertising costs, and tax sale fees.
Property taxes become delinquent on April 1st annually, at which point a 3% penalty is added. Prior to the tax certificate sale, delinquent taxes are advertised in a local newspaper for three consecutive weeks in May. This advertisement ensures public notice of properties with outstanding tax obligations.
Interest accrues from June 1st until the property owner pays the taxes. While the maximum interest rate is 18% per year, bidding typically drives this rate down. If interest on a redeemed certificate is less than 5% of its face value, a mandatory 5% charge is due, unless the certificate was awarded at 0%. Certificates are electronic files within the tax collector’s office and expire seven years from issuance.
Preparing to Purchase
Thorough preparation and due diligence are essential before participating in a tax certificate auction. Identifying properties with delinquent taxes is the initial step, often facilitated by county tax collectors who advertise them in local newspapers during May. Many counties also make this information available online through their tax collector websites or auction platforms. Tax certificates on homesteaded properties with a face value under $250 are typically not sold to the public.
Prospective purchasers must conduct comprehensive research on any property associated with a tax certificate. This includes physical characteristics (location, type, zoning). Understanding the property’s market value is important, as it may impact the tax deed process if redemption does not occur. Investigating existing liens beyond the tax lien is also important, as some may survive a tax deed sale.
Registering with the county tax collector or their designated third-party auction platform is a prerequisite for bidding. Florida primarily uses online auction systems like RealAuction or LienHub. Registration typically involves creating an account, providing personal or business information, and sometimes submitting documentation. Familiarize yourself with each county’s specific auction rules and procedures, as these can vary.
The Auction Process
Florida tax lien certificate auctions primarily occur online, with counties often using specialized platforms. After completing preparatory steps like account setup and property research, the auction begins. The bidding process is unique: instead of bidding up the price, bidders compete by offering the lowest interest rate they will accept on the certificate.
Bidding typically commences at the maximum 18% annual interest rate and decreases in decrements, often by one-quarter of one percent. The certificate is awarded to the bidder offering the lowest interest rate. Many online auction platforms use a proxy bidding system, allowing participants to enter their minimum acceptable interest rate, with the system automatically bidding down on their behalf until their specified rate is met or they are the lowest bidder.
Once a bid is successful, the investor pays the tax certificate’s face amount, including original unpaid taxes, penalties, advertising costs, and fees. Payment is typically facilitated through the online auction platform or directly with the county tax collector. After payment is confirmed, the tax lien certificate is issued, often electronically, and begins accruing interest at the winning bid rate.
Managing Your Tax Lien Certificate
After purchasing a tax lien certificate, the property owner has an opportunity to redeem it. Redemption occurs by paying delinquent taxes, accrued interest at the winning bid rate, and associated fees to the tax collector’s office. This payment is then disbursed to the certificate holder, closing the tax lien.
If the property is not redeemed within a specified timeframe, the certificate holder may apply for a tax deed. This application can be made after two years from the date taxes became delinquent, but no later than seven years from the certificate’s issuance. Applying for a tax deed involves paying all outstanding tax certificates on the property, including county-held ones, and various application fees. The tax collector then forwards the application to the Clerk of the Circuit Court.
Upon receipt of a complete tax deed application, the Clerk of the Circuit Court initiates a tax deed auction, a public sale of the property. Notifications are sent to the property owner and other interested parties, such as lienholders, prior to the sale. The property is sold to the highest bidder, and proceeds satisfy the tax lien certificate, other governmental liens, and associated costs, with any excess funds potentially available to the former property owner or other lienholders.