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

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

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. All states have laws that allow the local government to sell a home through a tax sale process to collect delinquent taxes.

So, if you don't pay your real property taxes in Delaware, the tax collector can sell the property to a new owner at a tax sale. You'll have a limited time to get current on the delinquent amounts before and after a tax sale.

Is Delaware a Tax Lien or Tax Deed State?

When you don't pay your property taxes, the past-due amount becomes a lien on your home. Each state has a different tax sale process to collect delinquent taxes.

Tax Deed States

In some states, the taxing authority sells the home if the homeowner doesn't pay off the debt. However, the purchaser might not get the deed to the property immediately. Sometimes, a redemption period must expire before the buyer receives the deed.

In Delaware, the tax sale is a public auction where the home is sold to the highest bidder. So, Delaware is considered a tax deed state.

Tax Lien States

In other states, the taxing authority sells the tax lien, and the purchaser must foreclose or use different procedures to get a deed to the property.

Other Tax Sale Procedures

And in some other states, a tax foreclosure process is used. Or the taxing authority simply executes its lien by taking title to the home.

How Does Delaware Handle Property Tax Non-Payment?

The taxing authority typically files a petition with the court and gets a judgment that directs the sheriff to sell the home at a public auction. This type of tax sale process is called a "monition" method. (Del. Code Ann. tit. 9 § 8721.)

Notice Before a Tax Sale Takes Place

Before the sale, the sheriff will post a notice on your home or some prominent part of your property. The notice gives you 20 days to get current on the overdue taxes, including penalties and costs. (Del. Code Ann. tit. 9 § 8723, § 8724.)

If you fail to get caught up, the court will issue a writ that directs the sheriff to sell the home at a public sale. (Del. Code Ann. tit. 9 § 8725.)

How Delaware Tax Sales Work

Again, Delaware is considered a tax deed state. The tax sale is a public auction where the home is sold to the highest bidder.

After the sale, the department of finance or the chief county financial officer generally must approve the final bid. For this approval to occur, the notice of the sale must include a statement that the sale is subject to this type of approval.

If the department of finance or the chief county financial officer doesn't approve the final bid from the sale, another sale will be held.

Can I Get My Home Back After a Tax Sale in Delaware?

In Delaware, you can get your home back within 60 days after the day the court approves the sale. (Del. Code Ann. tit. 9 § 8729.)

How Much It Costs to Redeem Your Home After a Delaware Property Tax Sale

You can get your home back by paying:

• the amount of the purchase price, which is at least the amount of the back taxes and penalties, plus 15%, and
• costs associated with the sale, such as the filing fee and posting costs. (Del. Code Ann. tit. 9 § Sec. 8729, § 8723.)

How to Redeem the Property After a Tax Sale in Delaware

In a monition sale, you usually pay this amount to the purchaser of your home. But you can pay the required amount to the court if:

• you can't locate the purchaser (or the purchaser's legal representative, successors, or assigns)
• the purchaser refuses to accept the payment, or
• the purchaser doesn't reside within the county where your home property is located. (Del. Code Ann. tit. 9 § Sec. 8729.)

What Happens If You Can't Afford to Redeem After a Delaware Tax Sale?

If you don't redeem, the purchaser from the sale may petition the court for an order approving the sale and directing the sheriff to sign and deliver a deed to them. The purchaser then becomes the new owner of the home. (Del. Code Ann. tit. 9 § 8728.)

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 Delaware?

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

Talk to a foreclosure, tax, or real estate lawyer if you're facing a tax sale in Delaware and have questions about the process or need help redeeming your property.

To learn more about property taxes and other aspects of homeownership, get Nolo's Essential Guide to Buying Your First Home by Ilona Bray, J.D., Attorney Ann O'Connell, and Marcia Stewart.