What Happens If I Don't Pay Property Taxes in Tennessee?

If your Tennessee property taxes are delinquent, your property can be sold at a tax sale to pay the delinquent tax bill. But the winning bidder from the sale can't get ownership of your home right away. You'll get time to catch up on the overdue amounts before that happens.

However, you'll lose the property permanently if you don't pay off the debt during the "redemption period" after the sale.

How Do Property Taxes Work in General?

People who own real property have to pay property taxes. The government uses the money that these taxes generate to pay for schools, public services, libraries, roads, parks, and the like. Typically, the tax amount is based on a property's assessed value.

If you have a mortgage on your home, the loan servicer might collect money from you as part of the monthly mortgage payment to later pay the property taxes. The servicer pays the taxes on the homeowner's behalf through an escrow account. But if the taxes aren't collected and paid through this kind of account, the homeowner must pay them directly.

When homeowners don't pay their property taxes, the overdue amount becomes a lien on the property. A lien effectively makes the property act as collateral for the debt.

What Are the Consequences of Delinquent Property Taxes in Tennessee?

All states, including Tennessee, have laws that allow the local government to sell a home through a tax sale process (or get title to the property in another way) to collect delinquent taxes.

How Tennessee Property Tax Sales Work

Many of Tennessee's statutory tax sale provisions depend on the size of the county population or form of government. But here's how tax sales generally work: The county will file a tax lawsuit in court and then sell the property at a tax sale, which is a public auction, to satisfy the tax lien. (Tenn. Code Ann. § 67-5-2501).

Notice of the Tax Suit

After the suit is filed, each defendant named in the tax suit must be served by one of the methods authorized in the Tennessee Rules of Civil Procedure, like by providing a copy of the suit and summons to the taxpayer personally or by certified mail, or by constructive service of process (publication). (Tenn. Code Ann. § 67-5-2415, Tenn. R. Civ. P. 4).

Notice of the Tax Sale in Tennessee

Notice of the tax sale must be advertised in a local newspaper or by printed handbills posted publicly, whichever the court orders. The sale notice must also be sent to all interested persons, generally by certified mail. (Tenn. Code Ann. § 67-5-2502).

Your Right to Cure the Delinquency

You can stop the process by paying the delinquent amounts, including overdue taxes, interest, penalties, and costs. The court will then dismiss the tax lawsuit. (Tenn. Code Ann. § 67-5-2411).

How a Tennessee Tax Sale Works

At the conclusion of the delinquent tax suit, the county holds a tax sale to sell the property to collect the overdue taxes. If no one bids on the home, the clerk of court will make a bid on behalf of the taxing entity. However, the clerk may decide not to bid at the tax sale if environmental risks are present on the property. (Tenn. Code Ann. § 67-5-2501).

After the sale, the purchaser gets a tax deed, subject to the redemption period (see below). (Tenn. Code Ann. §§ 67-5-2501, 67-5-2504).

How to Redeem the Property

Many states give delinquent taxpayers the chance to pay off the amounts owed and keep the home. This process is called "redeeming" the property.

How the Right to Redeem Usually Works

In many states, the homeowner can redeem the home after a tax sale by paying the buyer from the tax sale the amount paid (or by paying the taxes owed), plus interest, within a limited amount of time. Exactly how long the redemption period lasts varies from state to state, but usually, the homeowner gets at least a year from the sale to redeem the property. In other states, though, the redemption period happens before the sale.

Can I Get My Home Back After a Tennessee Tax Sale?

In Tennessee, the redemption period begins when the court enters an order confirming the sale. Generally, the redemption period is one year. But this time frame may be reduced under some circumstances, like if the taxes are more than five years overdue but less than eight years (180-day redemption period), eight or more years' delinquent (90-day redemption period), or if the home is vacant or abandoned (30-day redemption period). (Tenn. Code Ann. § 67-5-2701).

To redeem your home after the tax sale, you must pay the proper redemption amount and file a motion with the court. (Tenn. Code Ann. § 67-5-2701). Talk to an attorney if you need help preparing and filing a motion to redeem.

How Much You'll Have to Pay to Redeem Your Home After a Tennessee Tax Sale

To redeem your home following the sale, you'll have to pay:

• the total amount of the delinquent taxes
• penalty
• interest
• court costs, and
• interest on the entire purchase price paid by the purchaser who bought the home at the tax sale. (Tenn. Code Ann. § 67-5-2701).

Additional Amounts You Might Have to Pay to Redeem After a Tennessee Tax Sale

Within ten days after you file the motion to redeem (and make your redemption payment), the court clerk will send a notice to the purchaser who bought the home at the tax sale about your motion. (Tenn. Code Ann. § 67-5-2701).

The purchaser then has 30 days to file a response to the motion seeking reimbursement for certain expenses. For instance, you might have to reimburse the purchaser for:

• taxes, penalty, interest, and court costs that the purchaser paid
• reasonable payments the purchaser made for insurance and any improvements to the property
• reasonable costs the purchaser paid for maintaining the home
• reasonable expenses the purchaser paid as a result of a judicial or administrative order requiring him or her to immediately bring the property into compliance with applicable building code or zoning regulations
• reasonable payments the purchaser made for homeowner's association dues or obligations resulting from covenants running with the land which are secured by a lien against the home, and
• additional interest (Tenn. Code Ann. § 67-5-2701).

If the purchaser doesn't file a response to your motion asking for any additional amounts from you (or to allege that your motion to redeem was not properly or timely filed), the redemption is considered complete and the court will enter an order to this effect. (Tenn. Code Ann. § 67-5-2701).

What Happens to My Mortgage in a Tax Sale?

Because a property tax lien has priority, mortgages (and deeds of trust) get wiped out if you lose your home through a tax sale process. So, If your loan isn't escrowed and you fail to pay the property taxes like you're supposed to, the loan servicer will usually advance money to pay delinquent property taxes to prevent a tax sale from happening.

Most mortgages have a clause allowing the lender to add the amount it paid to bring the taxes current to your loan balance. You'll then have to make repayment arrangements with the servicer or potentially face a foreclosure.

What Options Do I Have If I Can't Afford to Pay My Property Taxes in Tennessee?

If you're having trouble paying your property taxes, you might be able to reduce your tax bill or get extra time to pay.

Getting Help

If you're already facing a property tax sale in Tennessee and have questions (or need help redeeming your property), consider talking to a foreclosure, tax, or real estate lawyer.