For most homeowners and real estate investors, property taxes are a necessary part of owning real estate. Unless you qualify for a property tax exemption, it's a required part of owning property. Failure to pay real estate taxes can result in a variety of negative consequences for property owners but a prime opportunity for investors to purchase discounted real estate, which begs the question, "Can someone take your property by paying the property taxes?"
State and local jurisdictions dictate the consequences of delinquent real estate taxes including whether someone can take your property by paying its taxes, what the process is for the sale and redemption of taxes, and beyond. Whether you're looking for an opportunistic way to buy real estate or you're a curious property owner, learn how the process works here.
How property tax payments work
Property taxes are collected by the local taxing authority each year to help fund necessary public services for the area. While most homeowners pay their annual tax bill, some do not. If payments are not made to the county treasurer in a timely manner they become delinquent, incurring interest and fees each month they remain unpaid.
In certain municipalities, the treasurer's office will eventually place a property tax lien on the property. This lien is a public claim for the outstanding delinquent tax, meaning the property cannot be transferred or sold without the tax lien being paid or transferring as an outstanding debt to the buyer.
In order to recoup the delinquent property tax at a faster rate, some states and jurisdictions will sell the tax lien to third-party investors through a tax lien sale. The purchasing investor bids on the tax lien, buying the right to collect the unpaid taxes in addition to monthly or quarterly penalties and fees. This process does not give the tax lien buyer any rights or claim to the property, simply the right to collect the taxes.
If the taxes continue to remain unpaid, certain states and jurisdictions then place the property for sale through a tax deed sale. Tax deed sales can wipe out all interest including ownership rights or other debts like a mortgage on the property upon sale or after the redemption period expires. So in this case, a person can take your property by paying the taxes, but there are caveats.
Paying someone else's delinquent taxes can get you a property, but not always
Paying someone's taxes does not give you claim or ownership interest in a property, unless it's through a tax deed sale. This means that paying taxes on a property you're interested in buying won't do you any good.
The only time taxes are typically paid for by someone else outside of a formal tax lien or tax deed sale is in efforts to keep the property from going to tax sale because that person has an interest in the property. For example, I invest in nonperforming mortgage notes, meaning I own the right to collect on a delinquent mortgage. If the property is vacant or the property owner simply isn't paying the taxes, it's in my best interest to pay the taxes to avoid it going to sale. Because I have a vested interest in the property, I don't want my interest to be wiped away as I pursue foreclosure or other foreclosure alternatives.
Another example of when you may want to pay someone else's taxes is if you inherited a property and the property is going through probate, which can be a long process in some states. Heirs with rightful claim to the property should maintain the taxes to avoid additional penalties, fees, or it potentially going to a tax sale.
Taking a property through a tax deed sale
Tax lien sales and tax deed sales are only conducted in select states and jurisdictions, some doing one or the other while other states use a hybrid of both. Other municipalities may not even offer the opportunity for investors to participate in tax sales.
Each state and tax collector determines their process for collecting delinquent taxes as well as the exact process for how a tax deed sale works. Some states, like Florida, offer tax deed sales in which the winning bidder has the right to take possession of the property after sale but with a cloud on title. If the property is occupied at the time of sale, the tax buyer will need to file an eviction but has the right to renovate or rent the property after the eviction is complete. However, they must cure the title defect before selling.
Other states or jurisdictions, like Georgia, have a right of redemption, which is a specified period of time in which the owner or other parties with legal interest in the property can redeem the tax deed sale by paying the full amount plus fees and interest.
Other ways paying taxes can get you a property
There is another obscure way to potentially gain title to a property by paying its taxes called "adverse possession." With adverse possession, a third party must publicly occupy and maintain a property for a significant period of time (usually two to five years or more) including paying property taxes. After the minimum adverse possession period has passed, the third party can apply for a possession claim.
Adverse possession laws, like tax sale laws, vary from state to state, meaning how long the party must remain in the property without dispute from the homeowner will differ. In Arizona, for example, the adverse possession period is only two years, but in Virginia, it's 15 years. This process, often referred to as "squatters rights," doesn't happen as often as people may think but technically is a legal way to take someone's property by paying the taxes.
As you can see, the answer to the question "Can someone take your property by paying the delinquent property taxes?" isn't very simple since there are so many variances and nuances to how and if a property can be taken by paying the taxes. In most cases paying someone else's taxes doesn't make sense and isn't a way to gain title to a property. But in some cases, it can be a worthwhile investment strategy. Investors hoping to gain access to a property by paying its taxes should continue to learn about the tax sale process and adverse possession laws in their area. Knowing your local rules will help you determine if and how this strategy can work for you.