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

What happens if you don’t pay your New Mexico property taxes? You might eventually lose your home.

By , Attorney

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 New Mexico, the county can eventually sell your home to a new owner at a tax sale, and you won't be able to get it back afterward by redeeming it.

You'll have plenty of time to get current on the delinquent amounts before a sale occurs, though. And if a problem occurred in the sale process, you might be able to invalidate the sale and recover your property.

How Long Can You Go Without Paying Property Taxes in New Mexico?

If your New Mexico property taxes are delinquent for more than two years, your home will be added to what's called a "tax delinquency list." (N.M. Stat. Ann. § 7-38-61.)

Three years after the first delinquent date shown on the list, the Taxation and Revenue Department will schedule a sale to sell your home to pay off the tax debt. (N.M. Stat. Ann. § 7-38-67.)

What Type of Notice You'll Receive Before the Tax Sale Occurs

New Mexico's Taxation and Revenue Department must mail you a notice about the upcoming tax sale and publish notice in a newspaper.

Notice by mail. The Department must send you a notice by certified mail, return receipt requested, at least 20 days, but not more than 30 days, before the tax sale date. The notice will let you know how much you have to pay in taxes, penalties, interest, and costs to get current on the debt. (N.M. Stat. Ann. § 7-38-66.)

Notice by publication. In New Mexico, notice of the sale must be published in a local newspaper for three weeks or, if the area doesn't have a newspaper, then in a newspaper published in a nearby county. (N.M. Stat. Ann. § 7-38-67.)

What Happens at a New Mexico Tax Sale

The tax sale consists of a public auction where the Department sells the home to the highest bidder. After the sale, the purchaser gets a deed (title) to your home and becomes the new owner. (N.M. Stat. Ann. § 7-38-70.)

The minimum price at the sale can't be less than the total amount of all delinquent taxes, penalties, interest, and costs. (N.M. Stat. Ann. §§ 7-38-67, 7-38-70.)

Sometimes, the Department will agree to sell only part of the property to cover the delinquent taxes, penalties, interest, and costs, like if:

  • your property can be divided, and
  • you agree to this arrangement. (N.M. Stat. Ann. § 7-38-67.)

How to Stop a New Mexico Tax Sale: Pay the Delinquent Amounts

You can stop the sale by paying the delinquent taxes, penalties, interest, and costs by 5:00 p.m. of the day before the sale. (N.M. Stat. Ann. § 7-38-66.) This payoff is called "redeeming" the property.

Paying the Delinquent Amounts Over Time

Or you may enter into an installment agreement by 5:00 p.m. of the day before the sale. (N.M. Stat. Ann. §§ 7-38-66, 7-38-68.) The installment agreement can't extend for longer than 36 months, and interest will accrue at 1% per month. (N.M. Stat. Ann. § 7-38-68.)

But the tax sale may proceed if you:

  • don't make the installment payments on or before the dates specified in the agreement
  • fail to pay any other property taxes when due, or
  • fail to meet any other condition contained in the agreement. (N.M. Stat. Ann. § 7-38-68.)

Also, if you previously entered into an installment agreement to pay the delinquent taxes and failed to meet your obligations under that agreement, you can't do another one. So, for example, if you previously defaulted on an installment agreement, you won't be eligible to enter into another contract to get caught up on the delinquent amounts. (N.M. Stat. Ann. § 7-38-68.)

You Can't Redeem After a Tax Sale in New Mexico

In some states, a homeowner who loses their home to a tax sale can get the house back by catching up on the delinquent amounts or by paying the purchaser the amount paid at the sale, plus some other amounts. This process is also called "redeeming the home."

In New Mexico, however, you can't redeem your home after a tax sale.

Getting Your Home Back By Challenging the Tax Sale

While New Mexico law doesn't have a law giving you the right to redeem after the sale, you might be able to get your home back following a tax sale by challenging the sale in court. (N.M. Stat. Ann. § 7-38-70.)

You'll have to show:

  • your property wasn't subject to taxation for the tax years claimed
  • the Department failed to mail the notice before the sale or didn't receive any required return receipt
  • you had paid all delinquent taxes, penalties, interest, and costs prior to the sale, or
  • you entered into an installment agreement to redeem the home before 5:00 p.m. on the day before the sale but the sale went ahead anyway. (N.M. Stat. Ann. § 7-38-70.)

You must file such a suit within the two years after the sale. (N.M. Stat. Ann. § 7-38-70.)

What Happens to My Mortgage in a Tax Sale?

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.

The Servicer Might Pay Any Delinquent Taxes If You Don't

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, any mortgages get wiped out if you lose your home through a tax sale. 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.

If You Don't Reimburse the Servicer, You Might Lose Your Home to a Regular Foreclosure

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.

Your Servicer Might Set Up an Escrow Account

After demanding repayment of the amount it paid for the taxes, penalties, plus interest (assuming you repay this tax 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.

What Gives the Servicer the Right to Set Up an Escrow Account?

Many mortgages have a clause allowing the lender to establish an escrow account basically at any time. 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.

Pros and Cons of Having an Escrow Account

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 perhaps other bills, are due.

Getting Help

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 New Mexico and have questions about the process,

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.

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