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 the District of Columbia, the mayor can sell your home at a tax sale. But you'll be able to stop the sale by getting current on the debt. You'll also have some time after the sale to pay off the tax debt, plus costs and expenses, and reclaim the property.
If you get behind in paying your real property taxes in D.C., the past-due amount automatically becomes a lien on your home as of the date the tax was due and unpaid. (D.C. Code § 47–1331.)
The mayor may then appoint an agency to conduct a tax sale, which will be a public auction, to sell the property. (D.C. Code § 47-1332, § 47-1346.)
At the auction, the buyer has to pay at least the amount of the past-due taxes. (D.C. Code § 47-1346.) However, as of 2021, the tax sale threshold is generally $2,500, meaning your home can't be sold for less than $2,500 in delinquent taxes. (D.C. Mun. Regs. Tit. 9, § 317.)
If no one bids enough to cover the amount of the overdue taxes, the real property is bid off to the mayor, who purchases it in the name of the District of Columbia. (D.C. Code § 47-1352.)
Before the sale, you'll get one notice of delinquency in the mail, letting you know that if you don't get caught up on the overdue amounts, the mayor will sell the home. (D.C. Code § 47-1341.)
You'll get the notice at least 30 days before a notice of sale is published. The notice of sale must be published in two newspapers at least one time. The notice, which includes the list of properties that will be sold, must also be posted on the Office of Tax and Revenue's website. (D.C. Code § 47-1342.)
You can stop the sale from happening by paying the total amount stated in the notice of delinquency. (D.C. Code § 47-1341.)
After the auction, the high bidder (the purchaser) gets a certificate of sale. (D.C. Code § 47-1348.)
The certificate doesn't transfer the home's legal title or give the purchaser the right to enter the home. To get legal title to the home, the purchaser must foreclose your right of redemption (see below). (D.C. Code § 47-1348.)
Once your redemption right is foreclosed, the purchaser gets a deed to the home and becomes the property's new owner. (D.C. Code § 47-1382, § 47-1370.)
In D.C., you get at least six months, called a "redemption period," to pay off the tax debt after the sale (known as "redeeming" the home).
Following the sale, the purchaser must wait six months before it takes steps to foreclose your right to redeem. (D.C. Code § 47-1370.) After foreclosing your right of redemption, the purchaser will own your home.
You can redeem at any time up until the foreclosure is final. (D.C. Code § 47-1360.) If you haven't redeemed by the end of the foreclosure, the purchaser gets a deed (title) to your home. (D.C. Code § 47-1382.)
To redeem your home, you'll have to pay:
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 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 the District of Columbia 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.