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. All states have laws that allow the local government to sell a home through a tax sale process to collect delinquent taxes. Accordingly, if you don't pay the real property taxes on your Colorado home, the county treasurer can hold a tax lien sale and you could eventually lose ownership of your property.
But the winning bidder from the sale can't get ownership of your home right away; you'll get some time to get caught up on the overdue amounts before this happens. You'll most likely eventually lose the property permanently, though, if you don't pay off the debt during what's called a "redemption period" after the sale.
Again, if you don't pay your property taxes in Colorado, the delinquent amount becomes a lien on your home. Once there's a tax lien on your home, the tax collector may sell that lien at an auction. This auction is called a "tax lien sale." Then, if you don't pay off the amount of the lien plus various other amounts in a specified amount of time, the winning bidder can get title to your home.
In Colorado, property taxes become due and payable on January 1 of the year following that in which they're levied and become delinquent on June 16 of that year. (Colo. Rev. Stat. § 39-10-102). Properties are eligible for a tax lien sale the same year they become delinquent.
The county treasurer sells tax liens at a public auction. (Colo. Rev. Stat. § 39-11-108). Colorado tax sales typically take place in the fall of each year but must be held on or before the second Monday in December. (Colo. Rev. Stat. § 39-11-109). The bidding starts at the amount of the delinquent taxes, interest, and fees then due. (Colo. Rev. Stat. § 39-11-101).
No later than September 1, the treasurer will mail you a notice that you're behind on taxes. The notice will inform you that the treasurer will sell the tax lien for your home at a public auction on a certain date if you don't pay the delinquency by the date specified in the notice, which is no less than 15 days from the date the notice was mailed. (Colo. Rev. Stat. § 39-11-101).
The treasurer must also publish notice of the tax lien sale, including the date, time, and place of sale, in a newspaper, and post the notice in a conspicuous place in the treasurer's office. (Colo. Rev. Stat. § 39-11-102).
The winning bidder at the auction is issued a certificate of purchase and gets the right to collect the tax debt from you, plus interest. (Colo. Rev. Stat. § 39-11-108). If you don't pay off the amount of the lien plus various other amounts in a specified amount of time, the winning bidder can get title your home.
If no one bids for the lien at the sale, the county treasurer will "strike off" the lien to the county (or city, town, or city and county) for the amount of past-due taxes, delinquent interest, and fees. (Colo. Rev. Stat. § 39-11-108). The county gets the certificate of purchase and can eventually get title to your home if you don't pay off the debt.
Many states give delinquent taxpayers the chance to pay off the amounts owed and keep the home. This process is called "redeeming" the property.
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.
In Colorado, after the tax lien sale, you get a three-year redemption period during which you can pay off the tax debt, plus interest and fees, and keep your home. (Colo. Rev. Stat. § 39-11-120).
Also, you can redeem at any time before the execution of a treasurer's deed giving the purchaser, or the county, title to your home. (Colo. Rev. Stat. § 39-12-103).
Once three years pass, the person or entity that bought the lien at the sale can get title to your home by requesting a deed from the treasurer. (Colo. Rev. Stat. § 39-11-120).
After the person or entity that bought the lien at the tax sale requests a deed from the treasurer, the treasurer must serve you a notice by personal service or by either registered or certified mail not more than five months nor less than three months before the deed is issued. The notice will include, among other things, when the time for redemption expires or when the tax deed will be issued. (Colo. Rev. Stat. § 39-11-128).
If your home was struck off to the county and the county has held the certificate of sale for three or more years, the board of county commissioners may apply for and receive title in the same manner as if a private individual (or entity) purchased the lien. (Colo. Rev. Stat. § 39-11-142).
Tax liens are generally valid for 15 years and are, in most cases, canceled at the 15-year anniversary date of the sale if not redeemed or if a treasurer's deed has not been applied for before the 15-year date. (Colo. Rev. Stat. § 39-11-148).
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, if you lose your home through a tax deed process, mortgages get wiped out. So, the loan servicer will usually advance money to pay delinquent property taxes to prevent this 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 it paid, you'll be in default under the terms of the mortgage, and the servicer can 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, plus interest (and 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 usual 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.
The downside to having an escrow account is that you'll have to make a bigger payment to the servicer each month. 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.
If you're having trouble paying your property taxes, you might be able to reduce your tax bill or get extra time to pay. If you're already facing a property tax lien sale in Colorado and have questions or need help redeeming your property, consider talking to a foreclosure lawyer, tax lawyer, or real estate lawyer.