TAX FORECLOSURE v. MORTGAGE FORECLOSURE

Tax foreclosure operates differently than a mortgage foreclosure although both foreclosures are based on having accrued arrears.  When a lender conducts a (mortgage) foreclosure sale, the actual property itself is sold and the homeowner ceases to have any ownership interest in the property after the sale.  When the county tax collector (“Collector”) conducts a (tax) foreclosure sale, the actual property itself is not sold but rather the tax lien is sold.  The tax lien entitles the lien purchaser to request that judgment be entered giving the purchaser fee simple title to the property.

NOTE:  THIS IS GENERAL STATUTORY INFORMATION. SOME COUNTIES (ESPECIALLY BALTIMORE CITY) HAVE THEIR OWN SLIGHTLY DIFFERENT VARIATIONS TO WHAT THE GENERAL STATUTE REQUIRES.  ALLOWED EXPENSES ARE ALSO STATUTORY AND MAY VARY BY COUNTY.

THE FORECLOSURE SALE

The Collector has a very structured tax sale notification process.  You can visit the tax office in the county where the property is located for specific information about current tax sale dates, notices, protocols, etc.

Exceptions – Md. Tax-Property Code 14-811 provides that certain properties may be withheld from sale if the amount of the lien is less than $250 per year, if the homeowner is low income, at least 65 years old, or disabled.  In Baltimore City, the property may be withheld if the total taxes (plus interest and penalties) are less than $750 or if the lien consists only of a water/sewer lien. Baltimore City may not sell a property for water/sewer lien unless the lien is at least $350, the property is not residential and the arrears are for at least three (3) quarters.

At least 30 days before any property is first advertised for sale, the Collector will mail the homeowner a notice with information related to the amount of taxes due, the tax process, tax credits, assistance programs, elderly assistance, etc..  EFFECTIVE JANUARY 1, 2020, the notice will include language that free counseling is available via the HOPE hotline and local housing counseling agencies.

The sale will be a public auction.  Any one that wants to attend the auction for purposes of bidding must remit a non-refundable deposit. Once bidding commences, the Collector will make the initial bid.  If anyone present makes a higher bid, that person/company wins the auction (“also called the purchaser”). If no person/company makes a bid after the Collector’s initial bid, then the Collector wins the auction.

Within 60 days after the sale, the Collector must send the homeowner a notice via first class mail stating that the property was sold, the date of sale, the amount of highest bid, the lien amount, notice regarding the right to redeem, and notice that purchaser may file redemption case. The notice will also provide the redemption amounts based on whether the homeowner redeems: 1) before the redemption case is filed; 2) 4 months after the sale but before the redemption case is filed; and 3) after the redemption case is filed.

After the auction (and after the purchaser remits the full bid price plus penalties, interest and expenses), the Collector will issue the purchaser a Certificate of Sale (“COS”).  The COS will contain certain information (date of certificate, property description, amount of taxes due at the time of sale, purchase price, amount of taxes due at time of sale with interest and penalties, redemption rate, date that the action to redeem right of redemption may be filed, and date of expiration of the COS) relevant to the sale.

The purchaser can assign the COS after received.

The COS expires and becomes null and void two (2) years after the date of sale if no attempts to file a foreclose action have ensued.

REDEEMING THE PROPERTY

Unlike in a mortgage foreclosure, a homeowner (or another person/company with an interest in the property) may redeem the property after a tax sale. Redemption refers to the period of time after the foreclosure sale that a homeowner has to pay all outstanding tax arrears paid by the purchaser, interest to the purchaser, attorney’s fees, taxes that have accrued since the auction, municipal liens, certain expenses, etc. in order to salvage the property.  As redemption is statutory, there is very little room to negotiate or dispute redemption fees.  The fee structure is a little more technical so just read this as a general overview.

During the redemption period (and up to the entry of judgment), homeowners retain all property rights as they had before the sale.

Homeowners have six (6) months from the date of sale to redeem by right.  After the six (6) months post-sale period expires, homeowners can redeem up to the entry of judgment. Once redeemed, the homeowner is in good standing with the Collector and the COS is destroyed.  The purchaser has no claim or interest in the property.

If a homeowner does not redeem in the first six (6) months after the sale, the purchaser can file its Complaint to Foreclose Right of Redemption (“redemption case”) in the Superior Court.  In the redemption case, the homeowner is put on final notice regarding the amount and timeframe that he/she can redeem the property.  If the homeowner does not participate in the redemption case and/or does not redeem, the Court will enter judgment in favor of the purchaser which awards title to the purchaser free and clear of any other liens or claims to interest in the property.  Once judgment is entered, there are very limited circumstances under which the Court can set aside or vacate the judgment.

THE FORECLOSURE OF THE RIGHT OF REDEMPTION CASE IN CIRCUIT COURT

• Please visit My Sister's Place website for a list of free domestic violence resources including hotlines, shelters and legal assistance.
• Please visit District of Columbia's government website for a lit of free resources and hotlines.The earliest that the purchaser can file the redemption case is six (6) months after the foreclosure sale.  NOTE:  this time frame is different in Baltimore City. The purchaser may not file the Complaint that initiates the case until at least two (2) months after sending the first notice and at least 30 days after sending the second notice.  The notices will be sent by first class mail and must contain information about the issuance of the COS, a statement that the purchaser may file the redemption case anytime two (2) months after the notice, the total redemption amount, etc.

  When the purchaser files the redemption case, the summons will issue and the purchaser must serve all named defendants.  The purchaser will be named as the plaintiff. Anyone with a verifiable interest in the property (all record owners, mortgagees, homeowners associations, etc). must be named as defendants.  Service is effectuated by mailing a copy of the summons and Complaint via certified mail, return receipt requested.  The purchaser must also request that the Court issue an order of publication that will be posted in a paper of general circulation for a period of time (putting the defendants on notice of the redemption case and the amount and timeframe to redeem) and will also be sent to the defendants via mail.  Tenants (that can be verified) must also be served with notice of the filing and a copy of the Complaint.

  After receipt of service, if a defendant challenges the validity of the taxes, the proceeding or the sale, he/she must file an Answer alleging the aforementioned defenses. If no Answer is filed, the Court is permitted to presume that no disputed issues or amounts prevent the Court from entering judgment.

  If no defendants appear or file an Answer, the Court can enter judgment for Plaintiff after the last of:  1) time noted in the summons expires; 2) time noted in the order of publication expires; or 3) 33 days after mailing the order of publication for defendants that didn’t receive a summons.

  Defendants have until the entry of judgment to redeem the property but once the judgment is entered, the property is gone.  The purchaser can request a Writ of Possession after the judgment that will authorize the Sheriff to conduct an eviction of the property.