Each year, as the calendar changes, the tax collecting divisions of political subdivisions (Parish, City, etc.) gear up for the increased workload that comes along with preparing for tax sales. In the State of Louisiana, owners of immovable property (real estate) are required to pay property taxes to the parish and/or the city. In certain instances, some or all of the property tax may be exempt (either due to non-profit status or a homestead exemption). However, for many residents, at least a portion of the property taxes remain due. When the property taxes are not paid, the property is subject to a tax sale.
If property is sold at a tax sale, the former assessed owners (tax debtors) have a period of time when they may redeem the property from the tax sale purchaser by paying the delinquent amounts paid by the tax sale purchaser along with applicable penalties, fees, and interest. Previously, that redemption period was three years for all properties (excluding property in New Orleans). However, in 2014, Constitutional Amendment Number 10 (Act 436 – HB 256) was proposed to reduce the tax sale redemption period from three years to eighteen months on properties that were considered blighted, hazardous, uninhabitable, or abandoned. On the November 4, 2014 ballot, the proposed Constitutional Amendment was approved by 54.32% of the voting public. Louisiana Constitution Article 7, Section 25 (B)(3) now states, in part, “…when such property sold is vacant residential or commercial property which has been declared blighted … or abandoned … it shall be redeemable for eighteen months after the date of recordation of the tax sale …”
The tax sale process involves multiple steps. The procedure begins by the distribution of tax bills informing the landowner of all amounts due. In most parishes, including East Baton Rouge Parish, tax bills are sent to homeowners starting in late November or early December and are delinquent by January 1st the following year. Louisiana law provides that “the tax collector shall seize, advertise, and sell tax sale title to the property or an undivided interest therein upon which delinquent taxes are due, on or before May 1st of the year following the year in which the taxes were assessed, or as soon thereafter as possible.” LSA R.S. 47:2154
The tax collector must comply with multiple requirements in the tax sale process. First, the tax collector must provide a delinquency notice in January or February to the tax debtor (and any other party requesting notice) by certified mail informing them of amounts owed. Thereafter, if the tax bill remains unpaid, there is a mortgage and conveyance record search performed, and an additional notice is sent out. Finally, the tax collector will publish a notice in the official journal of the political subdivision twice within thirty days and advertise for sale properties with delinquent statutory amounts owed.
After the notice and advertising requirements are met, the tax sale title to the property is sold at a public auction (either in person or online). At the tax sale, potential purchasers bid on percentage interests in the tax sale title. The lowest percentage bid will purchase that interest in the tax sale title in exchange for paying 100% of the past-due amounts.
Once the tax title to the property is sold, the tax debtor has either a three year or eighteen month redemption period, depending on the condition of the property. The property is redeemed by paying the price given, including the amount paid by the tax sale purchaser, five percent penalty thereon, and interest at the rate of one percent per month until redemption. LSA Const. Art. 7, Section 25 (B)(1)
The above referenced constitutional amendment reducing the redemption period for tax sales of properties which are considered blighted or abandoned became effective January 1, 2015. It is easy to forget about the amendments and laws passed during different elections when those changes do not necessarily affect our daily lives. However, property owners should be cognizant of this change to the redemption period for abandoned or blighted properties to avoid their properties being placed in potential jeopardy. This constitutional amendment may also provide opportunities for investors to focus the properties that they target due to the opportunities afforded by the shortened redemption period.