People who own real property must 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, in Connecticut, after the past-due amount becomes a lien on the property, the tax collector can sell the home at a public auction (a tax sale) or through a tax foreclosure process. You'll get notice before either of these sales happen, as well as the opportunity to get caught up on the delinquent amounts plus interest, fees, and costs. If you aren't able to pay up, though, you'll eventually lose ownership of your home permanently.
Under Connecticut law, the tax collector must send you (the taxpayer) notice before the sale. The collector will send you:
The collector must also post, file, and publish notice of the sale before it takes place. (Conn. Gen. Stat. § 12-157).
At the tax sale, the collector sells the home to the highest bidder. If no one bids on the property at the auction or the bid isn't high enough to cover the amounts owed, the collector sells the property to the municipality. Within two weeks after the sale, the collector executes a deed to the high bidder or the municipality. The unrecorded deed remains at the town clerk's office for six months, subject to your right of redemption (see below). (Conn. Gen. Stat. § 12-157).
If you don't pay your real property taxes in some parts of Connecticut, you might face a tax foreclosure instead of a tax sale.
In Connecticut, the tax collector of the municipality may file a lawsuit in court to foreclose the tax lien. The court sets the time limit for redemption. Upon the expiration of the period for redemption, the court makes a final judgment of the foreclosure. (Conn. Gen. Stat. § 12-181, Conn. Gen. Stat. § 12-191).
In some cases, the tax collector may initiate a summary proceeding to foreclose. A summary procedure can happen if the fair market value of your home is less than the total amount you owe, including tax liens and other encumbrances, and is not more than $100,000. (Conn. Gen. Stat. § 12-182).
Many states give delinquent taxpayers the chance to pay off the amounts owed and keep the home, even after a tax sale happens. 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 often, 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 Connecticut, the redemption period is usually six months after the sale. This time frame can vary, though, depending on your particular circumstances. If you abandon the home, for example, or the property meets other conditions established by town ordinance, you get 60 days after the sale to redeem. (Conn. Gen. Stat. Ann. § 12-157).
You can get your home back by paying:
Again, the court sets the time limit for redemption. Upon the expiration of the period for redemption, the court makes a final judgment of the foreclosure. (Conn. Gen. Stat. § 12-181, Conn. Gen. Stat. § 12-191).
You can get your home back by paying the amount of the tax lien, plus interest, lien fees, and other accrued charges (Conn. Gen. Stat. Ann. § 12-189).
The redemption period with this type of foreclosure ends on the last day of the fourth month after the month in which the collector filed the petition for summary foreclosure in court. (Conn. Gen. Stat. § 12-183).
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 your home is sold through a tax sale or tax foreclosure, the sale wipes out any mortgages. 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 tax sale or tax foreclosure in Connecticut and have questions or need help redeeming your property, consider talking to a foreclosure lawyer, tax lawyer, or real estate lawyer.