Legal Definitions - redemption price

The redemption price refers to the specific amount of money that must be paid to reclaim or buy back an asset, property, or security that was previously sold, mortgaged, or subject to a lien. It is the cost required to exercise a "right of redemption," which is the legal right to recover ownership or clear a claim against an item by paying off the outstanding debt, interest, and any associated fees or penalties.

• Example 1: Homeowner Facing Foreclosure

  Imagine a homeowner, Sarah, falls behind on her mortgage payments, and her bank initiates foreclosure proceedings. In many jurisdictions, even after a foreclosure sale, Sarah might have a limited period, known as the "right of redemption" period, during which she can reclaim her home. To do so, she would need to pay the new owner (or the bank, if the property hasn't been sold yet) the full amount of the outstanding mortgage debt, plus any accumulated interest, penalties, and foreclosure costs. This total sum that Sarah must pay to get her home back is the redemption price.

• Example 2: Corporate Bonds or Preferred Stock

  A large corporation, "Tech Innovations Inc.," issues preferred stock to investors. The terms of this stock include a provision that allows Tech Innovations Inc. to buy back these shares from investors at a predetermined future date or under certain conditions. The specific price at which the company can repurchase these shares, as outlined in the original agreement, is the redemption price. For instance, if the preferred stock was issued at $100 per share with a redemption price of $105, the company would pay $105 per share to buy them back from the investors.

• Example 3: Property with a Tax Lien

  Consider a commercial property owner, David, who fails to pay his annual property taxes. The local government then sells a tax lien on David's property to an investor, Emily, who pays the overdue taxes. David typically has a statutory period (e.g., two years) to "redeem" his property from the tax lien. To do this, David must pay Emily the original amount she paid for the lien, plus a specified interest rate and any additional fees or penalties that have accrued. The total amount David must pay to clear the lien and fully regain unencumbered ownership of his property is the redemption price.