In most cases, a mortgage is eliminated after a Florida tax deed sale because property taxes have priority over nearly all other liens. However, the mortgage must have been properly notified of the tax deed sale, and title insurance is still typically required before the property can be sold or financed.
Why property taxes have priority over mortgages
In Florida, property taxes are considered superior liens, meaning they take priority over nearly all other claims against the property. If property taxes go unpaid, the county can issue a tax certificate to investors who pay the delinquent taxes. If those taxes remain unpaid after the required period, the certificate holder can apply for a tax deed sale through the county.
Because the unpaid taxes come before the mortgage in lien priority, a successful tax deed sale generally wipes out the mortgage lien attached to the property. This is one reason tax deed investing can be attractive: properties may be acquired free from existing mortgage debt. However, that outcome depends on whether the proper legal procedures were followed.
Because the unpaid taxes come before the mortgage in lien priority, a successful tax deed sale generally wipes out the mortgage lien attached to the property. This is one reason tax deed investing can be attractive: properties may be acquired free from existing mortgage debt. However, that outcome depends on whether the proper legal procedures were followed.
Mortgage holders must receive notice of the tax deed sale
Florida law requires that all parties with a recorded interest in the property receive notice of the tax deed sale. Under Florida Statute 197.522, the clerk of court must send notice to:
If the mortgage lender receives proper notice but does not act to protect its interest (for example, by paying the delinquent taxes), the mortgage lien is generally extinguished after the tax deed sale.
However, if a mortgage holder did not receive proper notice, the lender may later challenge the sale. Because of this risk, title underwriters review the notice process carefully before issuing title insurance on tax deed properties.
- Mortgage lenders
- Recorded lienholders
- The property owner
- Other parties listed in public records
If the mortgage lender receives proper notice but does not act to protect its interest (for example, by paying the delinquent taxes), the mortgage lien is generally extinguished after the tax deed sale.
However, if a mortgage holder did not receive proper notice, the lender may later challenge the sale. Because of this risk, title underwriters review the notice process carefully before issuing title insurance on tax deed properties.
Why title companies still require title review
Even though a mortgage may be eliminated by the tax deed sale, title companies usually will not insure the property automatically. This is because several questions must still be answered, such as:
Title insurers must evaluate these issues before issuing a policy, because defects in the tax deed process could allow prior parties to challenge ownership. Without title insurance, most buyers and lenders will not proceed with a transaction.
- Were all required parties properly notified?
- Were the statutory tax deed procedures followed correctly?
- Are there other surviving liens on the property?
Title insurers must evaluate these issues before issuing a policy, because defects in the tax deed process could allow prior parties to challenge ownership. Without title insurance, most buyers and lenders will not proceed with a transaction.
Why many investors seek title certification after a tax deed sale
Because tax deed titles may contain potential risks, investors often need to clear those issues before selling or refinancing the property. Historically, this was done through a quiet title lawsuit, which can take months and involve court proceedings.
In many cases today, a tax deed certification review can allow investors to obtain a title insurance policy more quickly, sometimes without filing a quiet title action. For investors looking to sell the property, refinance it, or develop it, resolving title issues early can help prevent delays when a buyer or lender requests title insurance.
In many cases today, a tax deed certification review can allow investors to obtain a title insurance policy more quickly, sometimes without filing a quiet title action. For investors looking to sell the property, refinance it, or develop it, resolving title issues early can help prevent delays when a buyer or lender requests title insurance.
If you have property in Florida and need help with expediting the tax deed certification process, contact Accelerated Title Solutions today.
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