Legal Definitions - tax redemption

Tax redemption refers to the legal process that allows a property owner, or another party with a vested interest, to recover ownership of a property after it has been sold at a tax sale due to unpaid property taxes. This process typically involves paying all outstanding taxes, penalties, interest, and any associated costs incurred by the buyer at the tax sale, within a specific timeframe established by law.

Here are some examples to illustrate how tax redemption works:

• Scenario: Homeowner Reclaiming Primary Residence

  Maria owned her family home for decades but, due to a sudden job loss and unexpected medical expenses, fell behind on her property taxes for three consecutive years. The county eventually sold her home at a tax sale to an investor, hoping to recoup the unpaid taxes.

  Illustration: Within the state's two-year tax redemption period, Maria secured a temporary loan from a family member. She then paid the county the full amount of overdue taxes, accumulated penalties, interest, and the amount the investor paid at the tax sale, plus any additional legal fees the investor incurred. By doing so, Maria successfully exercised her right of tax redemption, regaining full legal ownership of her home and nullifying the tax sale to the investor.

• Scenario: Business Reclaiming Commercial Property

  A small manufacturing company, "Precision Parts Inc.," owned a vacant industrial lot intended for future expansion. Due to an administrative oversight in their accounting department, the property taxes on this specific lot went unpaid for several years, leading to its sale at a county tax auction to a competing business, "Global Gears Corp."

  Illustration: Upon discovering the error and the subsequent tax sale, Precision Parts Inc. quickly initiated the tax redemption process. They paid all delinquent taxes, penalties, interest, and the purchase price paid by Global Gears Corp. to the county treasurer within the statutory redemption period. This action allowed Precision Parts Inc. to reclaim the industrial lot, preventing Global Gears Corp. from taking ownership and preserving their long-term expansion plans.

• Scenario: Mortgage Lender Protecting Its Interest

  A bank held a mortgage on a rental property owned by Mr. Davies. Mr. Davies stopped paying his property taxes, and the property was subsequently sold at a tax sale to an individual buyer, Ms. Chen.

  Illustration: To protect its significant financial interest (the mortgage lien) in the property, the bank, as a lienholder, decided to exercise its right of tax redemption. The bank paid the outstanding taxes, penalties, interest, and the amount Ms. Chen paid at the tax sale. This action allowed the bank to redeem the property, preventing Ms. Chen from taking clear title. The bank would then typically add these redemption costs to Mr. Davies's mortgage balance or pursue foreclosure to recover its investment, as Mr. Davies was still in default on both his taxes and his mortgage.