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

If you don’t pay your property taxes in Montana, you might eventually lose ownership of your home.

By , Attorney

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. 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 Montana home, the county treasurer can hold a tax lien sale and sell that lien—not the property itself—in the form of a "tax lien certificate" to a third party, called an "assignee." If you don't get caught up on the overdue amounts before the redemption period expires, the assignee can apply for a deed to your home. After the assignee applies for the deed, the property is auctioned to the highest bidder at a tax deed sale.

Notice You'll Get Before a Tax Lien Attaches to Your Property in Montana

In Montana, all taxes due and not paid on or before 5:00 p.m. on May 31 of each year are delinquent. (Mont. Code Ann. § 15-16-102). Before a lien can attach to your home, the county treasurer must publish or post a notice of the pending tax lien in a newspaper. The notice must include a statement that the delinquent taxes, including penalties, interest, and costs are a lien upon the property and that unless these amounts are paid before the specified date, a tax lien will attach to the home and may be assigned to a third party. (Mont. Code Ann. § 15-17-122).

The notice must be published in a qualified newspaper. But if the county, or an adjacent county, doesn't have a newspaper, the treasurer must post the notice in three public places in the county. (Mont. Code Ann. § 7-1-2121). The notice must be first published or posted on or before the last Monday in June. (Mont. Code Ann. § 15-17-122).

How Tax Lien Certificate Sales Work in Montana

If proper notification was given, the lien attaches to the property no later than the first working day in August. The treasurer then prepares a tax lien certificate. (Mont. Code Ann. § 15-17-125).

The county will then sell and assign the certificate to any person who, after providing proof of a mailed notice to the person who owes the taxes, pays to the county the amount of the delinquent taxes, including penalties, interest, and costs, accruing from the date of the delinquency. The notice must have been mailed at least two weeks before the payment date, but not earlier than August 15 and not more than 60 days prior to purchasing the assignment. (Mont. Code Ann. § 15-17-323).

Tax Deed Sales in Montana

In Montana, you can save your home from a tax deed sale (see below) by paying the owed taxes, interest, and other charges during the redemption period (described below). But if you don't pay off the lien by getting current on the delinquent amounts before the redemption period expires, the assignee can apply for a tax deed. Before applying for a tax deed, the assignee has to send a notice that a tax deed will be auctioned unless the property tax lien is redeemed before the auction date. (Mont. Code Ann. § 15-18-219).

Then, within 60 days of the application, the property is auctioned off to the highest bidder. (Mont. Code Ann. § 15-18-220).

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.

Right to Redeem the Property In Montana

Following the tax lien sale, you can protect your ownership of the home by redeeming it.

How long you get to redeem. In Montana, you must redeem by:

  • generally, the first working day in August, three years after the attachment of the tax lien or
  • the first working day in August, two years after the attachment of the tax lien if the property is an undeveloped lot upon which special improvement district assessments or rural special improvement district assessments are delinquent. (Mont. Code Ann. § 15-18-111).

What happens if you don't redeem. Between May 1 and May 30 of the year in which the redemption period expires, the county or assignee has to send a notice that a tax deed may be issued to the county or will be issued to the assignee unless the property tax lien is redeemed before the redemption period's expiration date. (Mont. Code Ann. § 15-18-212).

If you don't redeem by the deadline, the county will issue a tax deed (title) to the purchaser or the county and you lose all rights to your home (Mont. Code Ann. § 15-18-211).

How Much It Costs to Redeem After the Tax Lien Sale

To redeem your home after the tax lien sale, you must pay:

  • the past-due amounts, including delinquent taxes, penalties, interest, and costs and
  • the amount of subsequent taxes that have accrued along with interest and penalty. (Mont. Code Ann. § 15-18-112).

Does a Mortgage Survive a Tax Deed Sale in Montana?

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.

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 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.

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 lien sale in Montana 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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