What Happens If You Don't Pay Property Tax

If you don't pay property tax, you will face increasing financial penalties, a tax lien on your property, and eventually the loss of your home through a tax sale or foreclosure. The exact timeline and process vary by state and county, but the outcome is the same: the government can take your property to recover the unpaid taxes.

Immediate Consequences: Interest and Penalties

Property taxes are due annually, and missing the deadline triggers immediate financial consequences. For example, in Philadelphia, if you miss the March 31 deadline, your bill becomes past due and accrues monthly interest and penalties. You'll receive bills from the Department of Revenue and potentially a collection agency. If you still don't pay or enroll in a payment plan by December 31, your account becomes delinquent on January 1 of the following year. The City can then put a lien on your property and add legal fees to your account, increasing your debt.

Similarly, in Los Angeles County, if you do not make your complete annual property tax payments, the Treasurer and Tax Collector will impose late fees. If unpaid property taxes are left unaddressed, additional fees and penalties accumulate.

The Tax Lien: A Legal Claim Against Your Property

Once your property taxes are delinquent, the county will place a tax lien on your property. A lien is a legal claim against a property because of debt owed. This lien gives the government a secured interest in your property, meaning they can eventually force a sale to collect the debt. Importantly, property tax liens take priority over other liens, even if those other debts were recorded first. This means that if the property is sold, the county will be paid the amount owed for property taxes before any other creditors, including your mortgage lender.

Because the county gets paid first, lenders closely monitor unpaid property taxes. If your mortgage contract requires you to pay property taxes on time, the lender may take action. Some lenders may choose to pay the delinquent taxes themselves to protect their interest and then require you to repay them, often through an escrow account. If you fail to comply, the lender may pursue foreclosure.

Tax Sales and Auctions: Losing Your Property

If the taxes remain unpaid, the county can sell your property at a tax sale or auction. The process varies by jurisdiction, but it generally involves a waiting period and multiple notices before the sale.

In Los Angeles County, the default initiates a 5-year waiting period for residential properties and a 3-year waiting period for non-residential commercial properties. During this time, the delinquent taxes, interest, and penalties accumulate until they are redeemed. At the end of the waiting period, if the tax is not redeemed, the Treasurer and Tax Collector has the power to sell the property. The county sends several notices: a Notice of Impending Sale, a Notice of Auction, and an Official Notice of Auction or Sale. The deadline to pay off property taxes, fees, and costs to save a property from being sold is 5:00 PM Pacific Time on the last business day prior to the date of auction.

In Philadelphia, the City uses tax sales, rent sequestration, and lawsuits against property owners to collect overdue real estate taxes. In a tax sale proceeding, the City files a petition with the Court of Common Pleas seeking to sell your property. A hearing is scheduled, and if you fail to appear, the City can ask the Court to enter a decree allowing the sale of your property at auction.

In Illinois, the county may sell the unpaid debt to a tax buyer at a public auction called a "tax sale." There are two main types: the annual tax sale (yearly sale of the prior year's delinquent taxes) and the scavenger tax sale (optional sale of delinquent taxes not sold at the annual sale). After the sale, there is a redemption period during which you can pay the delinquent taxes, interest, penalties, and costs to reclaim your property.

Redemption Periods: A Chance to Save Your Home

Many jurisdictions offer a redemption period after a tax sale, during which the original owner can pay the owed amount and reclaim the property. The length of this period varies. In Illinois, after property taxes have been sold, there is a redemption period—a limited time to pay the delinquent taxes, interest, penalties, and costs to the county. If you fail to redeem within this period, the tax buyer may become the new owner and can evict everyone living in the property.

In Los Angeles County, the redemption period is essentially the waiting period before the auction: 5 years for residential properties and 3 years for non-residential commercial properties. You can redeem at any time before the auction by paying all delinquent taxes, interest, and penalties.

What to Do If You Can't Pay

If you cannot pay your property taxes, act quickly. Contact your local tax collector's office to discuss options. Many jurisdictions offer payment plans or assistance programs. For example, Philadelphia offers the Owner-Occupied Payment Agreement (OOPA) and other relief programs for eligible homeowners. Los Angeles County advises contacting the Treasurer and Tax Collector directly to find out about available options. You may also consider selling your home to pay off the taxes, using the proceeds to settle the debt.

Remember, the government's main goal is to collect taxes, not to take your home. Tax sales are usually a last resort, and there are often ways to avoid losing your property if you act promptly.

Sources

• Overdue Property Taxes – Consumer & Business
• What happens if you don't pay your Philly property tax?
• Unpaid property taxes (FAQ)