tax collector street sign

The Seven Rules you MUST follow when paying off your property tax lien

So you’re finally in a position where you can pay off the property tax lien (also known as ‘back taxes’) levied against, and maybe even foreclosing on, your home. Maybe you were able to refinance your property and obtain a loan. Or maybe you borrowed it from family or even pulled some money from your retirement or savings account. 

Whichever way you obtained the funds, let’s use this article to make sure you follow some basic rules and steps when paying off the tax lien. Failure to pay off a property tax lien correctly can result in additional interest, a total loss of the funds or worst, a loss of your home if the tax lien is in foreclosure.

The 4 Basic Rules

Rule #1 – Pay no one except the Tax Collector: never pay money to any party except the municipal tax collector where the property is located. New Jersey law actually prohibits tax payment to any party except your town or city’s tax collector. Exceptions of course can be made if you’re paying the title company or your attorney who’s serving as an escrow agent in a refinance or sale. But other than that, payment shouldn’t be made to anyone else. And CERTAINLY not to the tax lien holder who owns the tax lien against your house. He or she will receive their payment from the tax collector after you pay them.

Rule #2 – Follow the instructions: always follow the municipality’s exact instructions for paying off the tax lien. The instructions, including the allowed payment methods, should be included with the tax redemption statement.

Rule #3 – Get the final bill: always get a final tax bill, or what’s often referred to as a ‘tax redemption Statement’, from the tax collector before making payment. Never go by an amount told to you over the phone or something you saw on the town’s website. Contact the tax collector instead and get an official tax redemption Statement in writing via email, fax, hard copy etc. Additionally make sure that all due amounts, including all tax liens and any open taxes, are included on the tax redemption statement.

Rule #4Get a receipt: Always get some sort of proof that the tax lien has been paid. Make sure you receive something official by the city such as a stamped receipt or email confirmation showing that the tax lien has been “redeemed” or “paid in full”. Additionally, your town’s tax collection website should no longer show an open lien on your property.

 

In Foreclosure? Here are 3 More Rules to Follow....

If your tax lien is in tax foreclosure and you’re getting down to the wire before your home is taken then it is very important that you follow a few more rules when paying your tax lien. Personally, we think these are good rules to follow even if your tax lien is not in foreclosure.

Rule #1 – Again, Follow the instructions: We’ve mentioned this earlier in Rule #2, but feel the need to emphasize it again because it’s that important. Once your property is in foreclosure, and particularly when you’re in the foreclosure’s last stages, it’s very important that you accurately follow the municipality’s instructions for paying off the tax lien. Failure to do so could result in the loss of your home.

 

Attempting to pay off the taxes earlier in the process (i.e. before the foreclosure starts) allows you to make a mistake or two along the way. If you go down to the tax collector with a personal check, for example, you can head over to the bank and get a cashier’s check. However, if you’re facing a deadline where your home is days away from being taken, you may not have time for any mistakes.

 

Generally speaking, cash (which should never be sent through the mail), cashier checks and money orders are accepted. Personal checks are not.

 

Rule #2 Jot down names, dates, times etc.: sometimes the tax redemption statement isn’t readily available when you go to pay off your tax lien because the tax collector has to verify the final amount due with the tax lien holder first. Make sure you record all dates, times and names of the city employees you speak to when requesting the statement. We have seen cases where a property owner was told that he couldn’t pay the taxes until the figures were first verified by the tax lien holder. During the “verification process” however, the tax foreclosure completed and the house was lost. Fortunately, the owner was able to fight it in court and show the judge that he had the funds in hand before the home was lost. He further showed that he tried to pay the taxes and was denied by the tax collector due to the verification. The Good news is that he got his property back. The bad news is that it cost him a few thousand dollars extra in legal fees to do so.

 

Rule #3 – Get the payment to the Tax Collector ASAP: In tax foreclosure, you want to the tax collector as soon as possible. Personally delivering the payment in person is the fastest and most guaranteed way to ensure that the tax lien is paid on time. If this isn’t possible, try to arrange to send the payment (again by certified check or whichever payment method the tax collector prefers) via FedEx to guarantee delivery with confirmation. Try to pay the taxes as soon as you can if you have the money. Paying right before the deadline could have devastating consequences if there are unanticipated hiccups along the way.

If you have questions about the process make sure you contact the tax collector’s office for answers and remember to get the name of the person(s) you speak to. As always we’re here to help.

A short summarized list of the rules....

  1. Only pay the tax collector.
  2. Follow the Instructions.
  3. Get the final bill before paying.
  4. Get a Receipt.

In Foreclosure….?

  1. Again, Follow the Instructions.
  2. Jot down names, dates, time, etc.
  3. Get the payment to the Tax Collector ASAP!
Picture of Ibrahim 'Eeb' Hughes

Ibrahim 'Eeb' Hughes

Eeb is an Entrepreneur and Investor of everything Family and Community. His passions include youth mentoring, working with homeowners to resolve distressed situations and traveling to locations close and far to witness the uniqueness and commonalities of other cultures. He can be reached at Eeb@CommonUnityRE.com