A "tax sale" is the most common remedy provided by local law for the collection of unpaid real estate taxes.
A Judicial Sale
In Texas, sale of land for the payment of delinquent taxes must be done through a judicial proceeding.
- An "action in personam": this is a suit against the person who owes the taxes. In this type of action, jurisdiction over the tax debtor must be acquired, and when rendered, the judgment may be enforced by execution as any other judgment.
See also Texas Bulletin TX2013006 – LEGISLATIVE UPDATES 2013 Part I relating to waiver of penalties and interest on certain delinquent ad valorem taxes.
See also Texas Bulletin TX2015004 – LEGISLATIVE UPDATE 2015 Relating to the Power of a Commissioner's Court to Authorize Ad Valorem Tax Sales of Real Property to be Conducted by Means of Online Auctions
- Redemption from Tax Sale
A procedure whereby a former owner, his successors in interest, or anyone having substantial interest in the premises, may obtain legal title as complete and as unqualified as it was before the tax assessed, by the repayment within the two years allowed by law, of the amount which the purchaser paid for the property plus interest and costs.
- Tax Certificate of Sale
A certificate which is issued to a purchaser of real estate as a tax sale by the public officer who conducts the sale as evidence of the payment of the delinquent taxes plus interest and the holder's right to a deed to the property in the event that the property is not redeemed by its owner through the payment of the delinquent taxes within the time provided by law.
- Tax Deed
A deed conveying title to property which is sold by the local or taxing authority for the nonpayment of taxes.
- Tax Rolls
Records that are public in nature and that show the taxable property, tax amounts, assessed valuations, etc..
- Tax Sale
A sale of property where taxes levied against the property of against the owner of the property remain unpaid after the time within which payment must be made has elapsed.
- Tax Title
A title to property acquired by a purchaser at a tax sale. The purchaser, at the tax sale coming strictly within the rule caveat emptor. One who claims title to land by virtue of a tax sale is bound to show the existence of every fact necessary to give jurisdiction and authority to the officer who made the sale, and a strict compliance by that person with all things required by the statute in carrying out the sale.
Purchaser's Title or Interest
The purchaser at a tax sale acquires good and perfect title to the land upon execution of a tax deed in his favor, subject to defendant's right of redemption. See Texas Tax Code 34.01
Right of Redemption
Section 34.21 of the Texas Tax Code provides that land sold for taxes may be redeemed from the sale. The statutes fix the time in which the redemption may be made (usually from one to three years).
Section 34.21(a) The owner of property sold for taxes may redeem the property within two years after the sale, to a purchaser other than the taxing entity under the following terms:
The property must be homestead, used for agricultural purposes or be subject to a mineral interest and the original owner must pay to the buyer the amount the purchaser bid for the property, recording fees and all taxes, penalties, interest and costs
a. plus 25% if paid during the first year
b. plus 50% if paid during the second year
Section 34.21 (b) provides for a 2 year right of redemption for residence homestead, having agricultural use or a mineral interest when title is in the taxing authority
Section 34.21 (e) provides for a 6 month redemption for land not residence homestead and a 6 months for land with agricultural use or a mineral interest
Clearing the Title from the Effect of a Tax Deed
A proper quitclaim deed, or its equivalent, duly executed by the grantee(s) of the tax deed or the last grantee must be filed for record.
Insurance of Tax Titles
Because tax foreclosure must follow Texas statutes, the title examiner must be certain to obtain enough information to determine that the law was followed.
The following items need to be accomplished or considered when examining a tax title:
- Whether the necessary parties have been named as defendants.
- Whether said parties have been personally served. Service by publication will require the passage of 3 years with no suit brought to set aside the sale before the property may be safely insured.
- Whether the proceedings and the sale have been consummated in strict compliance with the statutes.
- Whether the inadequacy of the consideration may be a ground for a possible invalidation.
- Whether the right of redemption has been exercised by any defendant. If there are any mineral rights owned by the taxpayer, a 2 year statute of limitations applies.
- Whether the time in which to exercise the right of redemption has expired.
- Whether the decree of the Court is final and nonappealable.
- Whether a proper tax deed has been executed and filed for record.
- Whether the former owner has surrendered possession of the property.
Redemption after Tax Sale Does Not Cut Off Prior Mortgage
A person who loses their property to a tax foreclosure sale (which would normally cut off a junior deed of trust lien) and who then redeems the property does not receive the title back free and clear of the lien. The redemption simply takes matters back to the status prior to the tax foreclosure.
See: T & M Sales & Envtl. Sys. v. LSS Invs., 2005 Tex. App. LEXIS 8874 (Tex. App. 2005)
"In Reynolds v. Batchelor, 216 S.W.2d 663, 667 (Tex. Civ. App.-Fort Worth 1948, writ ref'd n.r.e.), our sister court stated as a general principle that an owner who does not pay taxes should not be allowed to strengthen his title at a tax sale. Similarly, an owner who redeems his property sold at a tax sale should not thereby strengthen his title against other owners or lienholders. See id. A recent case further reiterates that redemption merely relieves the property of the tax sale, and does not give new title. Assocs. Home Equity Servs. Co. v. Hunt, 151 S.W.3d 559, 562 (Tex. App.-Beaumont 2004, no pet. h.). When the owner of the property or any person with an interest therein redeems the property, he restores the title to whom it belonged before the tax sale, except the tax lien has been discharged. See id. Thus, UMLIC's redemption did not extinguish its mortgagee-mortgagor relationship with T&M."