What Happens to Delinquent Property Taxes After Foreclosure?

 

ASK LEON

Bankruptcy expert Leon Bayer answers real-life questions.

Dear Leon,

I received a property tax bill on my house in California. I recently did a bankruptcy. I am also in foreclosure and I plan to move out of the property before the foreclosure sale is held.

One question that popped into my head about the property taxes is, bankruptcy aside, I have continued to live here and this has been my primary residence.  This being the case, can the tax collector maintain that the property taxes are my responsibility?

Thank you,

Rita

Dear Rita,

I just happen to have the answer you need.

You do not have to pay the property taxes, and in fact you shouldn’t. The taxes will be paid by your lender. After your lender forecloses, all sums that you owed, including the taxes, are satisfied by the transfer of the property to the lender under a foreclosure deed.

The property taxes are actually a debt against the property, not against you personally. If the taxes go unpaid long enough, the state will eventually hold a tax sale and auction off the property. In California, that time period is five years.

As a general rule, most properties subject to a mortgage will never face a tax sale, because the lender will advance money to pay the delinquent taxes. The lender will then demand reimbursement from the borrower. If it goes unpaid, the lender can foreclose on the property, just the same as it does when the normal loan payments are delinquent.

The fine print in a mortgage contract says that the borrower must maintain current taxes, and failure to do so is a monetary breach that may subject the property to foreclosure. Since in your case you are facing a foreclosure anyway for nonpayment of the mortgage, your nonpayment of the taxes will never matter.

-Leon

Guest blogger Leon Bayer practices bankruptcy law in Los Angeles, California.  He is a partner at Bayer, Wishman & Leotta.  

The opinions and advice in this blog post are from Mr. Bayer alone, and should not be attributed to Nolo.  By answering a question on this blog, Mr. Bayer does not become your lawyer.