Tax Lien Sale and Tax Lien Foreclosure Proceedings in Maryland and Washington, D.C.
Did you receive notice that a tax lien sale occurred or that a complaint to foreclose your right of redemption was filed? The goal of most investors in tax lien proceedings is to obtain title to the property. In some cases, a tax lien purchaser can achieve this goal after purchasing a tax lien attached to a property for merely hundreds of dollars.
In Maryland, statutory code provisions protect property owners from the loss of real property by requiring notice of tax sale foreclosure proceedings and an opportunity to redeem the property, at a minimum, before the right of redemption is foreclosed by the court. Even though property owners have the right to notice and an opportunity to redeem, the court may award the tax lien purchaser (the certificate holder) title to the property if the owner fails to redeem the property before the judgment date.
Property owners have a right to notice of the tax sale and foreclosure proceeding
More specifically, the Maryland Tax – Property Article provides: “[A]t any time after 6 months from the date of sale a holder of any certificate of sale may file a complaint to foreclose all rights of redemption of the property to which the certificate relates.” Tax – Property, § 14-833(a)(1). “The holder of a certificate of sale may not file a complaint to foreclose the right of redemption until at least 2 months after sending the first notice and at least 30 days after sending the second notice required under this subsection.” Tax – Property, § 14-833(a-1)(1); Maryland Rule 14-502.
These code sections require that a tax lien certificate holder give the property owner notice of the tax sale proceedings at least three times before the foreclosure action on the lien proceeds against the owner. Finally, “[t]he owner … may redeem the property at any time until the right of redemption has been finally foreclosed” by the court. Tax – Property, § 14-827.
Property owners have a right of redemption prior to foreclosure
According to Maryland law, a property is redeemed by paying to the County Tax Collector “the total lien amount paid at the tax sale for the property together with interest; any taxes, interest, and penalties paid by any holder of the certificate of sale; … any taxes, interest, and penalties accruing after the date of the tax sale; … and any expenses or fees for which the plaintiff or the holder of a certificate of sale is entitled to reimbursement under § 14-843.” Tax – Property, § 14-828(a). “On receipt of the proper amount, the collector shall notify the holder of the certificate of sale that the property has been redeemed and that on surrender of the certificate of sale all redemption money excluding taxes received by the collector will be paid to the holder.” Tax – Property, § 14-828(c). Some counties in Maryland deviate from the process described in this paragraph. Instead of the County Tax Collector accepting reimbursable expenses, some counties require owners to make payment of sums due directly to the plaintiff certificate holder.
If the owner fails to redeem the property, “[a]fter the time limit set in the order of publication and in the summons expires, the court shall enter judgment foreclosing the right of redemption.” Tax – Property, § 14-844(a). “If the court finds for the plaintiff, the judgment vests in the plaintiff an absolute and indefeasible title in fee simple in the property, free and clear of all alienations and descents of the property occurring before the date of the judgment and encumbrances on the property.” Tax – Property, § 14-844(b).
In some cases, the owner may reopen the judgment foreclosing the right of redemption
In the unfortunate event a property owner finds judgment was entered against them without their knowledge, Maryland law provides two options. First, an owner may attempt to void the sale under Tax – Property, § 14-848. These attempts have been successful when the property description in the tax sale was erroneous. A second and more common ground to reopen a judgment is to show that fraud or constructive fraud occurred during the course of the foreclosure proceeding. The Tax – Property Article provides: “A court in Maryland may not reopen a judgment rendered in a tax sale foreclosure proceeding except on the ground of lack of jurisdiction or fraud in the conduct of the proceedings to foreclose; however, no reopening of any judgment on the ground of constructive fraud in the conduct of the proceedings to foreclose shall be entertained by any court unless an application to reopen a judgment rendered is filed within 1 year from the date of the judgment.” Tax – Property, § 14-845. Cases directly related to reopening judgments include Canaj v. Baker and associated cases. Canaj, Inc. v. Baker & Div. Phase III, LLC, 391 Md. 374 (2006).
Post judgment procedural matters can be complicated. One significant concern is the existence of a condition precedent to post judgment review. “[A delinquent taxpayer] should be required to pay, or bring into court to be paid, to the party entitled to receive it the full amount of the taxes in arrear at the time of the sale by the collector together with the interest accrued thereon to the time of payment, and also all taxes that have subsequently accrued due on the property, with interest; and upon the full payment of such sums, the [property owners] should then have the relief prayed by them.” Id. at 389 (quoting Steuart v. Meyer, 54 Md. 454 (1880)).
Zaharevich Law Office assists property owners in the defense of tax lien sale and foreclosure proceedings in Prince George’s County, Howard County, Montgomery County, Maryland, and Washington, D.C.
Nothing stated in this article should be considered legal advice in any legal matter. Every property owner faced with foreclosure proceedings should seek out and obtain experienced legal counsel for assistance. Please see the Disclaimer.