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 your behalf through an escrow account. But if the taxes aren't collected and paid through this kind of account, you 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 home 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, failing to pay your real property taxes in Pennsylvania could lead to an upset tax sale or a judicial tax sale and the loss of your property.
Below is a summary of how Pennsylvania tax sales work, but tax sales in Pennsylvania are complicated. Consider talking to a licensed Pennsylvania attorney to get details about the process in your county.
Property tax sales in Pennsylvania are usually governed by the state's Real Estate Tax Sale Law. Under this law, if you get behind in your property taxes, your home is first put up for sale at an upset tax sale. If the property doesn't sell, the home is then usually sold at a judicial tax sale. If a property doesn't sell at the judicial sale, it goes on the repository list.
At an upset tax sale, a tax-delinquent home is sold subject to existing liens such as mortgages, judgments, and other liens. (72 P.S. § 5860.609).
At least 30 days before the sale, the tax claim bureau must mail you (the owner) a notice by certified mail. If it doesn't get a return receipt, the bureau must send another notice by first-class mail, at least ten days before the sale. (72 P.S. § 5860.602).
The bureau must make reasonable efforts to locate you and provide notice if the mailed notification is returned without the required signature or other circumstances raise doubt about whether you've received notice of the sale. (72 P.S. § 5860.607a). If the home is owner-occupied, the bureau must give written notice of the sale by personal service at least ten days before the sale or petition a court to waive this requirement. (72 P.S. § 5860.601).
The bureau must advertise a notice of the pending sale in a newspaper at least 30 days before the scheduled sale. The notice must also be posted on the property at least ten days before the sale. (72 P.S. § 5860.602).
You can stop the sale by:
If the home doesn't sell at the upset tax sale, the bureau may sell the property at a private sale or petition the court (that is, file a lawsuit) for an order to sell the home at what's called a "judicial tax sale." (72 P.S. § 5860.605, § 5860.610).
Unlike with an upset tax sale, homes that are sold at a Pennsylvania judicial tax sale are sold free and clear of liens. (72 P.S. § 5860.612).
After the tax claim bureau files its petition, the court will set a date for the judicial tax sale. (72 P.S. § 5860.612). Both upset tax sales and judicial tax sales are conducted as auctions.
If the bureau files its petition three months or more after the scheduled upset sale date, then the sale must be advertised in a newspaper at least 30 days prior to the sale. (72 P.S. § 5860.612). But if the petition is filed within three months of the scheduled upset sale date, the sale isn't advertised in a newspaper.
If the home doesn't sell at the judicial tax sale, it goes into the repository of unsold properties. (72 P.S. § 5860.626). The bureau may then, with the written consent of all the taxing districts where the property is located, sell the home without further court approval or publication in a newspaper. (72 P.S. § 5860.627).
The property is then conveyed to the purchaser free and clear of liens. (72 P.S. § 5860.627).
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.
The issue of whether or not you get to redeem your home after a tax sale in Pennsylvania is complex. In general, Pennsylvania's Real Estate Tax Sale Law says that you can't redeem your home after a sale. (72 P.S. § 5860.501). But you might be able to redeem in some circumstances.
To learn more, read Getting Your Home Back After a Property Tax Sale in Pennsylvania and consider talking to a foreclosure lawyer, tax lawyer, or a real estate lawyer.
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 sale 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 sale in Pennsylvania and have questions or need help redeeming your property, consider talking to a foreclosure lawyer, tax lawyer, or real estate lawyer.