All About Tax Lien Foreclosures:

Overview

A Tax Lien Foreclosure occurs when a property owner fails to pay the real estate taxes owed on their property. These unpaid real estate taxes become liens against the property.

Every County in New York State handles tax lien foreclosures in different ways. For instance, in New York City, instead of initiating its own foreclosure proceeding against a property owner, the NYC Department of Finance sells unpaid real estate tax liens to trusts named NYCTL Trusts who appear as Plaintiffs in the foreclosure proceeding.

The City of NY sells the dollar amount of the unpaid tax lien held against the property to the NYCTL Trust, not the physical property itself. The unpaid tax liens are transferred from the City of New York to the NYCTL Trust by an instrument called a Tax Lien Certificate. This has been done every year since 1996.

The NYCTL Trusts, in turn, hire servicers to collect the outstanding tax lien from the property owner/delinquent taxpayer (much the same way a credit card company will hire a collection agency to collect money owed to it by a delinquent cardholder).

The servicers for the NYCTL Trusts make every effort to seek payment from the property owner/delinquent taxpayer. After the servicers have exhausted all attempts to collect payment, they can initiate a foreclosure proceeding against the physical property itself. The court then orders a foreclosure auction be held to collect the money to satisfy the unpaid tax lien.

Many investors prefer tax lien foreclosures because tax liens are superior liens over mortgages and most other outstanding liens held against a property. Another advantage is that many of the properties sold at a tax lien auction are vacant or commercial pieces, highly desired by investors.

See our Online Research Center for links to the various county register's office that would handle tax lien foreclosures for their county.