If property taxes are not paid, the property could be sold at a tax sale. The Pennsylvania Real Estate Tax Sale Act (RETSA) holds that all lawfully levied taxes on property constitute a first lien on the property. Delinquent taxes can be higher than the mortgage in order of priority.
Each county has a Tax Claim Bureau that collects all the property taxes. The taxes become delinquent in the year following the year in which they were due. The Tax Claim Bureau will send a notice of the delinquent taxes by registered or certified mail with return receipt to the owner’s address. If the post office cannot deliver notice, then it is prominently posted on the property.
Upset Tax Sale
The first type of tax sale is the Upset Sale. An auction is held, and the buyer takes the property subject to the claim of all recorded mortgages, liens, ground rent, claims, and tax liens from the Pennsylvania Department of Revenue. To clear the title, the buyer must pay off the amounts outstanding against the property. Some people foolishly bid on property at an Upset Sale, thinking that they can buy the property for just a few thousand dollars. What they do not realize is that there are probably many other liens and claims against the property that must be satisfied before there can be clear title. In many cases, the mortgage lender will pay the back taxes before the Upset Sale to protect their interest.
Judicial Tax Sale
If the Upset Sale cannot produce a bidder who will pay the upset price, the Tax Claim Bureau may petition the county’s Court of Common Pleas to permit a Judicial Sale. For instance, a house may have a sizable mortgage against it, causing the bidders at the Upset Sale not to bid high enough to take ownership of the property subject to the mortgage. The Court of Common Pleas can set a sale date. The high bidder at a Judicial Sale takes title to the property free and clear of all mortgages, taxes, and liens. Ground rents still remain. In most cases, the mortgage lender will pay the back taxes to prevent a Judicial Sale.
Right of Redemption
The former owner of a property sold at a tax sale could redeem the property within one year from the date of the acknowledgment of the Sheriff’s Deed that awards ownership to the high bidder. To buy back the property, the former owner must pay the amount bid at the tax sale plus other costs and any liens or encumbrances that were paid. There are some exceptions. For instance, if the property were vacant or abandoned by the former owner, then they might not have the right to redeem it.