This is a follow-up to our Advisor article “Property Tax Forfeiture”.
The beginning of the year is the time to start thinking about property taxes in Minnesota. When property taxes are not paid in the year due, the taxes become delinquent as of January 1 of the following year. If the property owner does not contest the delinquent taxes, the district court automatically enters a judgment for forfeiture against the property typically in May following the delinquent tax year. The redemption period then commences. If the delinquent taxes remain unpaid at the expiration of the redemption period, the property is automatically forfeited to the state where it held by the state in trust for the local taxing districts.
Those holding liens on the property are usually not provided with any notice of the property’s delinquent taxes. Further, property taxes are senior to any mortgage encumbering the property. This means a mortgage is extinguished if the property is subsequently forfeited for delinquent property taxes.
As discussed in the previous Advisor, lenders can take several preemptive steps to protect themselves from losing their interest in a property due to tax forfeiture. Because the property tax forfeiture process can happen quickly in certain circumstances, it is best practice for lenders to take efforts to remain informed on the tax status of properties securing their loans.