People who own real property must pay property taxes. The government uses the money 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.
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 Maine, the tax collector can sell your property, or a percentage of it, at a tax sale.
But you'll have some time before and after the sale to pay off the debt and keep the property. In fact, you get two years after the sale to get current before the purchaser can get a deed to the property. However, if you fail to pay your Maine property taxes during the two-year "redemption period," you will end up losing your home.
Again, if you don't pay your property taxes, past-due amount becomes a lien on your home. Each state has a different tax sale process to collect delinquent taxes.
Maine is considered a tax deed state.
In some places, if the homeowner doesn't pay off the debt, the taxing authority sells the home.
In other places, the taxing authority sells the tax lien, and the purchaser then must foreclose or use other procedures to get a deed to the property.
And in other places, a tax foreclosure process is used, or the taxing authority simply executes its lien by taking title to the home.
In Maine, if your taxes are unpaid, the collector can sell your home at a public auction on the first Monday in February after the tax was assessed. (Me. Rev. Stat. Ann. tit. 36 § 1071.)
At the auction, your property is sold to the bidder who is willing to pay the taxes and costs due and willing to accept the smallest fractional part of your property. If no bidder offers to take only a portion of the property, the whole parcel will be sold. (Me. Rev. Stat. Ann. tit. 36 § 1074.)
The winning bidder at the tax sale gets the right to eventually get ownership of your home if you don't pay off the debt.
Before the sale, the collector must mail you notice about the sale and post the notice.
At least ten days before sale, the tax collector must notify you, the homeowner who lives at the property, about the time and place of the sale:
The collector must also post the notice publicly. (Me. Rev. Stat. Ann. tit. 36 § 1071.)
If you want to stop a Maine property tax sale from happening, you must pay the overdue taxes, plus costs, on or before the time of sale. (Me. Rev. Stat. Ann. tit. 36 § 1074.)
In Maine, you get two years after the tax sale, called a "redemption period," to redeem the home. (Me. Rev. Stat. Ann. tit. 36 § 1078.) During this time, you can pay off the delinquent taxes, which will prevent the person or entity that bought your home at the tax sale from getting ownership of your property.
But if you let the two-year redemption period expire and don't pay the debt, the purchaser will get a deed to the home. (Me. Rev. Stat. Ann. tit. 36 § 1080.)
To reclaim your home after the tax sale, you must pay into the municipal treasury the full amount due, including taxes, costs, and charges, plus interest at the rate of 8% per year from the sale date. The treasurer will then pass the funds along to the bidder to reimburse them for the amount paid at the sale. (Me. Rev. Stat. Ann. tit. 36 § 1078.)
If you have a mortgage on your home, the loan servicer might collect money from you as part of the monthly payment to pay the property taxes. The servicer then pays the taxes on your behalf through an escrow account.
But if the property taxes aren't collected and paid through this kind of account, you must pay them directly.
If your loan isn't escrowed and you don't pay the property taxes, the loan servicer might pay any delinquent taxes and then bill you for them. Here's why: Property tax liens almost always have priority over other liens, including mortgage liens and deed of trust liens. (For purposes of this discussion, the terms "mortgage" and "deed of trust" are used interchangeably.)
Because a property tax lien has priority, a completed tax sale process wipes out any mortgages. So, the loan servicer will usually advance money to pay delinquent property taxes to prevent this sale from happening. The servicer will then demand reimbursement from you, the borrower.
The terms of most mortgage contracts require the borrower to stay current on the property taxes. If you don't reimburse the servicer for the tax amount that it paid, you'll be in default under the mortgage's terms.
The servicer can then foreclose on the home in the same manner as if you had fallen behind in monthly payments.
After demanding repayment of the amount it paid for the taxes, penalties, and interest (assuming you repay this debt), your servicer will probably set up an escrow account for the loan.
Each month, you'll have to pay approximately one-twelfth of the estimated annual cost of property taxes—and perhaps other expenses, like insurance—along with your regular monthly payment of principal and interest. This money goes into the escrow account.
The loan servicer then pays the cost of the taxes and other escrow items on your behalf through the escrow account.
Many mortgages have a clause that allows the lender to establish an escrow account basically at any time it chooses. The servicer establishes and manages the account on the lender's behalf.
To find out if and when the lender can set up an escrow account for your loan, read your mortgage contract and any other relevant documentation you've signed, like an escrow waiver.
The downside to having an escrow account is that you'll have to make a bigger monthly payment to the servicer. On the positive side, having an escrow account saves you from having to come up with a large amount of money when tax bills, and possibly other bills, are due.
If you're having trouble paying your property taxes, you might be able to reduce your tax bill or get extra time to pay.
Talk to a foreclosure lawyer, tax lawyer, or real estate lawyer if you're facing a tax sale in Maine and have questions about the process or need help redeeming your property,
To learn more about property taxes and other aspects of homeownership in general, get Nolo's Essential Guide to Buying Your First Home by Ilona Bray, J.D., Attorney Ann O'Connell, and Marcia Stewart.