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

If you don't pay your delinquent property taxes, the state of Minnesota can eventually claim your home and then sell it to a new owner.

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 is a claim against your property to ensure you'll pay the debt; it 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 your property taxes in Minnesota, a court will eventually enter a tax judgment that gives the state a future vested interest in the property, subject to your right of redemption (see below). Once the redemption period expires, the home is forfeited to the state. The state can then sell the property to a new owner.

How Property Tax Forfeitures Work in Minnesota

In Minnesota, any unpaid property taxes and penalties become delinquent on the first business day in January after the year when the taxes and penalties are due. Also on this date, the county treasurer returns to the county auditor the county property tax lists for all real property taxes payable in the previous year. (Minn. Stat. § 279.02). Then, on or before February 15th, the county auditor will file a delinquent tax list with the district court. (Minn. Stat. § 279.05).

The court will enter a tax judgment against the parcels on the list for the delinquent amounts due, so long as no objections are made. (Minn. Stat. § 279.16, § 279.15).

Next, on the second Monday in May, the auditor will "bid in for the state" the amount of all delinquent taxes, penalties, costs, and interest due, which basically sells the property to the state in a tax judgment sale. (Minn. Stat. § 280.01, § 280.43). The state then gets an interest in each tax-delinquent property, subject to the redemption period.

If you don't pay the delinquent amounts during the redemption period, your property is forfeited to the state. (Minn. Stat. § 280.41). After the forfeiture, the state may, among other options, sell your home at a public auction to the highest bidder. (Minn. Stat. § 282.01).

How to Redeem the Property

Many states give delinquent taxpayers the chance to pay off the amounts owed and keep the home. This process is called "redeeming" the property.

How the Right to Redeem Usually Works

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.

Redemption Period in Minnesota

In Minnesota, the redemption period begins after the tax judgment sale to the state. During the redemption period, you can pay the delinquent tax amounts to avoid losing your home. But when the redemption period expires, the state gets absolute title to the home. (Minn. Stat. § 281.18).

How Long You Get to Redeem the Property in Minnesota

The redemption period is usually three years but depends on a few factors, including the use and location of the property.

Three-year redemption period. In Minnesota, the redemption period is typically three years from the time of the tax judgment sale. (Minn. Stat. § 281.17).

One-year redemption period for some properties. For some properties located in a targeted neighborhood or that meet other criteria, the redemption period is one year. (Minn. Stat. § 281.17).

Redemption period for abandoned or vacant properties. The redemption period is five weeks for abandoned homes (homes that meet certain criteria and have no lawful occupants) or vacant properties (empty parcels that meet specific criteria). (Minn. Stat. § 281.173, § 281.174).

How Much You'll Have to Pay to Redeem

To redeem your property, you must pay to the county treasury:

  • the amount "bid in" at the sale, including all delinquent taxes, penalties, costs, and interest, and
  • the amount of all subsequent delinquent taxes, penalties, costs, and interest. (Minn. Stat. § 281.02).

If you don't pay the delinquent amounts before the redemption period expires or 60 days after a final warning about the redemption period expiring is sent, whichever is later, the property is forfeited to the state. (Minn. Stat. § 281.18, § 281.21, § 281.23).

Stopping a Forfeiture With a Confession of Judgment

If you have sufficient income to catch up on the taxes but don't have a lump sum available to pay off the total delinquent amount all at once, you might be able to stop the forfeiture by entering a confession of judgment. With a confession of judgment, you admit that you owe the taxes and agree to pay off the delinquent amounts in yearly installments over a specified period, like ten years. (Minn. Stat. § 279.37). The confession of judgment substitutes for a tax judgment.

You can generally offer a confession of judgment any time after the delinquent taxes are determined in January and before the expiration of the redemption period and tax forfeiture. But you can't do a confession of judgment for some properties, like if the property is considered abandoned or vacant. (Minn. Stat. § 279.37).

Getting Your Home Back After a Tax Forfeiture With a Repurchase Agreement

If you lose your home to the state in a tax forfeiture, but it hasn't yet been conveyed to a new owner, you might be able to get it back under a repurchase agreement with the county board. Generally, though, a repurchase is permitted only during the six months following the forfeiture date. (Minn. Stat. § 282.241).

Also, under Minnesota law, at least one week before the sale of tax-forfeited property, a person who was the owner when the property was forfeited for nonpayment, that person's heirs, successors or assigns, or any person with the right under statute, mortgage or another agreement to pay taxes on the property may purchase the property. The purchase price is the greater of:

  • the parcel's appraised value or
  • the sum of all delinquent taxes and assessments, together with penalties, interest, and costs that accrued or would have accrued if the parcel had not been forfeited to the state. (Minn. Stat. § 282.012, § 282.241.)

Does a Mortgage Survive a Tax Forfeiture in Minnesota?

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 forfeiture 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.

Your Servicer Might Set Up an Escrow Account

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 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.

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. If you're already facing a property tax forfeiture in Minnesota and have questions or need help redeeming your property, consider talking to a foreclosure lawyer, tax lawyer, or real estate lawyer.

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