Imagine that you extend credit to a company and secure the loan with a deed of trust on its real property. The borrower may still be making its regular loan payments. However, it may already be showing signs of financial distress and has failed to pay property taxes. Those delinquent taxes are then sold, and a third party acquires a tax sale certificate. Suddenly, you face a problem: You do not hold the tax sale certificate, and the tax lien may take priority over your deed of trust. What do you do to protect your collateral? Although a tax sale certificate does not immediately transfer ownership of the property, it begins a legal process that can affect a lender’s rights, increase the cost of preserving the collateral, and ultimately threaten the lender’s lien position if the delinquency is not addressed. What Is a Tax Sale Certificate? When Nebraska real estate taxes become delinquent and remain unpaid, the county may eventually sell the tax lien through a tax sale.1 The purchaser at the tax sale receives a tax sale certificate rather than ownership of the property.2 Under the statute, the certificate evidences a perpetual lien on the real property for the taxes paid, and the holder may add any subsequently paid taxes to that lien. 3 If the property is not redeemed, the certificate may serve as the basis for further proceedings through which the holder may ultimately obtain title or enforce the lien, depending on the applicable statutory process. COUNSELOR’S CORNER Tax Sale Certificates What Nebraska Lenders Need to Know Laura P. Genett Associate, Baird Holm LLP 17 NEBRASKA BANKER
RkJQdWJsaXNoZXIy MTg3NDExNQ==