Can the Government Force Property Tax Lien Investors to Pay for Forced Property Maintenance?

When the city of Memphis, Tennessee, decided to mow the roughly 9,000 lawns in the municipal area that were in violation of various landscaping and safety codes, the decision cost millions of dollars.

According to the city government, Memphis manages “about 9,000 lots that are not being maintained” by their private owners. “Management” of these lots involves mowing and cutting about three times a year, which costs the city government and city taxpayers about $3 million a year, according to Memphis Public Works director Robert Knecht.

The result of this landscaping campaign is that pretty much no one is happy at the end of the day: the city is out $3 million, taxpayers feel they have been paying for something private homeowners should handle, and the owners of the properties believe they should not have to pay back the city for a service they never requested.

It’s pretty much par for the course when it comes to dealing with the government, except for one thing: Memphis has decided someone is going to pay and, furthermore, that someone is quite likely going to be a property tax lien investors like you.

Can the Government Force Property Tax Lien Investors to Pay for Forced Property Maintenance?

Property tax lien investors could face additional expenses

In Memphis, like many areas of the country, properties with delinquent tax debts go to auction via a tax sale.

When an investor at an auction buys the lien on the property, that buyer will now incur not only responsibility for the property taxes owed, but also for the estimated cost of lawn maintenance by the city.

For example, in one case where the property will go to auction this fall with a $3,000 lien, the investor who “wins” the auction will also face responsibility for the $20,000 (a real example) the city says it is owed for mowing the lawn a couple times a year for the past 10 years (assuming they started mowing the same time the owner stopped paying taxes).

Sure, debts often follow a property. However, the appeal for property tax lien investors is that the tax lien supersedes the other debts. In this case, Memphis is attaching the other debts to the tax lien even though the investor who bids on the property at auction will be bidding on a roughly $3,000 debt. It’s confusing and probably going to make someone very unhappy when they realize they’re on the hook for a little over $20,000 instead!

So, can the city actually make you pay for a decade of forced property maintenance when you buy a tax lien?

The answer is: it depends. One of the things that makes tax lien investing a bit complicated is that every state has a different process for selling these investment vehicles. Furthermore, the regulations and processes may also vary from county to county and city to city.

At PIP Group, we have spent years learning the various in’s and out’s of tax lien investing in dozens of areas around the country. We only invest in areas where the regulations and processes favor the property tax lien investors interests and strategies, and we know all of the little loopholes and fine print to read to make sure you are paying for what you’re getting instead of getting way more than you bargained for!

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About the Author

Charles Sells is the founder and CEO of The PIP Group, a turnkey service provider that focuses on investments in distressed real estate assets including tax liens, tax deeds, traditional foreclosures, fix-and-flips and long-term cash flow acquisitions. He has been involved in tax lien investing for over 20 years, during which time The PIP Group has grown to become one of the largest agencies of its kind with nearly 1,000 individual and institutional investors worldwide.

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