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

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 (or get title to the property in another way) to collect delinquent taxes. Accordingly, you could eventually lose your Wisconsin home if you don't pay your property taxes.

Generally, if you don't pay your property taxes in Wisconsin, the county can acquire the deed to your home using one of three methods after a couple of years, and then subsequently sell the property. But you usually get at least two years to pay off the delinquent amounts and "redeem" the property before the county can get ownership of your home.

How Tax Sales Generally Work

In a tax lien certificate sale, the taxing authority sells the tax lien, and the purchaser gets the right to collect the debt along with penalties and interest. If the delinquent amounts aren't paid, the purchaser can typically foreclose or follow other procedures to convert the certificate to a deed.

In some jurisdictions, though, a sale isn't held. Instead, the taxing authority executes its lien by taking title to the home. State law then generally provides a procedure for the taxing authority to dispose of the property, usually by selling it. In other jurisdictions, the taxing authority uses a foreclosure process before holding a sale or the tax collector sells the property itself.

But in Wisconsin, enforcement of a tax lien is through the issuance of a "tax certificate" to the county.

Wisconsin Tax Certificates

On September 1 of each year, the county treasurer issues the tax certificate, which includes all parcels that have unpaid taxes as of the close of business on August 31. (Wis. Stat. § 74.57). The county treasurer will mail you (the homeowner) a notice within 90 days after issuing the tax certificate. (Wis. Stat. § 74.59).

After the county issues a tax certificate, if you don't pay off the delinquent amounts during the redemption period (see below), the county can get title to your home using one of the following processes. (Wis. Stat. § 74.57).

By Recording a Tax Deed

The county can apply to the county clerk for a tax deed after giving you notice. The county clerk will then issue a deed to the county, and the county will record the deed. (Wis. Stat. §§ 75.12, 75.14).

By Foreclosing the Tax Certificate in the Same Way a Mortgage Lender Would Foreclose

The county may instead choose to foreclose the tax certificate using the same process as a mortgage foreclosure. (Wis. Stat. § 75.19).

By Foreclosing the Tax Certificate With a Statutory "In Rem" Foreclosure

The Wisconsin statutes also provide an "in rem" statutory procedure for foreclosing a tax certificate. In this process, the county files a petition with the court, along with a list of all tax-delinquent properties being foreclosed.

Like with a mortgage foreclosure, you (the owner) will receive notice of the action, and you may file an answer if you choose to do so. The county must also publish notice in a newspaper as part of the process. If the county proves its case, the court will issue a judgment of foreclosure, and you'll lose ownership of the home. (Wis. Stat. § 75.521).

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 Wisconsin

In Wisconsin, most people get a two-year redemption period to pay off all taxes, penalties, interest, and other costs (called "redeeming" the home) before the county can start the process to get title to the property.

But the redemption period is limited to one year under some circumstances, like if the city incurred costs in restoring the property to an erosion-free condition.

When the Redemption Period Begins in Wisconsin

The redemption period begins when the county treasurer issues the tax certificate, except for a few exceptions, like if the treasurer fails to mail a required notice about the certificate to you. (Wis. Stat. § 74.57). If that happens, then the redemption period begins on the mailing date. (Wis. Stat. § 74.59).

When Your Right to Redeem Ends in Wisconsin

Exactly when your right to redeem ends depends on which process the county uses to get ownership of your home following the redemption period.

The County Then Sells the Property

Once the county gets title to the property, it can sell it to a new owner. (Wis. Stat. § 75.35).

The county can usually sell it back to you if you want to repurchase the home. Generally, you'll have to make a request to do so before the property is made available for sale to the public. In most cases, it's cheaper and easier to pay off the delinquent amount before the redemption period expires rather than to repurchase the home after the county takes ownership.

Does a Mortgage Survive After a Tax Deed in Wisconsin?

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, mortgages are wiped out if your home is sold or foreclosed through a tax deed process. 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 monthly payment to the servicer. 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 about to lose your home because of delinquent property taxes, and have questions or need help redeeming your property, consider talking to a foreclosure lawyer, tax lawyer, or real estate lawyer.