How is a tax lien redeemed after the tax sale?
Category: Maryland Tax Liens
May 10, 2018
After a tax lien is purchased at the annual tax sale, it will continue to encumber the property (and the subject the property to a possible foreclosure) until the property is “redeemed.” Redemption is an industry term that refers to the extinguishment of the tax lien encumbering the property. In Maryland, in order to redeem a property, the redeeming party is typically required to pay all outstanding taxes, plus applicable interest, penalties, and charges, and any statutorily reimbursable legal fees.
What is tax lien redemption?
The redemption typically, when an owner or other interested party wants to redeem the property, they contact the tax office. This is especially true if no foreclosure case has been filed. Under the Maryland tax sale statute, legal fees are not generally reimbursable until after four months from the date of the sale. This means that a redeeming party is only required to pay the outstanding taxes, plus applicable interest, penalties, and charges, but not required to pay any legal fees. In this situation, because no legal fees are owed, the redeeming party pays the applicable amount directly to the county, which then issues a refund check to the lienholder for the amount of the tax certificate, plus applicable interest.
After four months from the date of the tax sale, a redeeming party must pay any of the tax lien holder’s legal fees that are reimbursable under the tax sale statute and the amount of reimbursable legal fees generally increases as certain conditions are met (e.g., a foreclosure case is filed in the Circuit Court).
Once legal fees are owed, the county typically does not permit a party to redeem the property, without first obtaining a release from the lienholder (or its attorney) for the reimbursable legal fees. Here, if a party contacts the county and has not yet paid the legal fees, the county will generally provide the redeeming party with the contact information for the lienholder or its attorney. The redeeming party then contacts the lienholder or its attorney and requests a statement of the reimbursable legal fees that must be paid in order to redeem. In most counties, the redeeming party pays these legal fees directly to the lienholder or its attorney.
Upon payment of those legal fees, the lienholder executes a release and sends a copy to the county tax office. Once the tax office has a copy of the release, the redeeming party then paysall outstanding taxes, plus applicable interest, penalties, and charges directly to the county. Upon payment of this amount, the property is redeemed and the county issues a refund check to the lienholder for the amount of the tax certificate, plus applicable interest.
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