Delinquent property taxes in Tennessee: the tax sale and redemption

Tennessee property tax is payable the first Monday in October, and unpaid tax adds 1.5% interest a month starting March 1. If the bill stays unpaid, the county’s delinquent tax attorney files suit, the court can order the property sold, and after the sale you have between 30 days and one year to redeem it, depending on how many years went unpaid. Redeeming costs the back taxes, interest, penalty and court costs, plus 12% a year on the price the tax sale buyer paid.

The calendar

State, county and municipal taxes the trustee collects are payable the first Monday in October (§ 67-1-701). Some counties with consolidated governments set different dates, and your bill shows yours. Under § 67-5-2010, interest of 1.5% is added to unpaid tax on the March 1 after the due date and on the first day of every month after that.

With round numbers: a $1,200 bill still unpaid on September 1 has picked up seven monthly charges, March through September. That is 10.5%, or $126, before any court costs.

From unpaid to a lawsuit

The trustee or collector publishes a notice once a week for two weeks in January, as the first step toward enforcing the tax lien (§ 67-5-2401). The delinquent tax attorney then files suit in the names of the taxing entities, no later than the last business day of March after that notice, and can add more parcels and more years of tax to the same suit without amending it (§ 67-5-2405). Once your parcel is in that suit, court costs join the balance.

That is still the cheapest point to act. The payoff is the tax, the interest and the costs, and no tax sale buyer has paid anything yet, so the 12% charge described below has not started.

The sale and the confirmation order

The court can order the property sold to satisfy the lien. The buyer pays the purchase price to the clerk, and the court enters an order confirming the sale. The redemption clock in § 67-5-2701 starts with that order, not with the auction.

How long you have to redeem

The period depends on how long the taxes were delinquent:

• five years or less: one year from the order confirming the sale;
• more than five years but less than eight: 180 days;
• eight years or more: 90 days.

The period drops to 30 days, regardless of the years owed, when the court finds the property abandoned. That showing takes periodic inspections over two months, at different times of day, with three or more of them finding evidence of abandonment.

What redemption costs

To redeem, you pay the delinquent taxes, penalty, interest and court costs, plus interest on the entire price the tax sale buyer paid. That interest runs at 12% a year, from the day the buyer paid the clerk until you file the motion to redeem (§ 67-5-2701).

With round numbers: if a buyer paid $40,000 at the sale and you file eight months later, the 12% alone is $3,200, on top of everything you owed in tax. The interest runs on the whole price, which can be many times the tax.

If the sale brings more than was owed

Excess proceeds do not go back to you on their own. Under § 67-5-2702, an interested person files a motion with the court asking for them, and the court pays them out in order: taxing entities, lienholders from the time of the sale, later lienholders, then the taxpayers who were defendants or their heirs. The motion has to be filed and served at least 30 days before the hearing, and an owner claiming through a deed must record it more than 30 calendar days before the hearing. Money nobody claims goes to the state’s unclaimed property program after the later of the final ruling on filed motions or one year after the redemption period ends.

If you still owe on a mortgage, your lender stands ahead of you in that order, so what reaches you is what remains after the lender is paid.

How to stop it before the sale

• Pay the trustee before the suit is filed. The balance is the tax plus the monthly interest.
• After the suit is filed, ask the delinquent tax attorney’s office or the court clerk for a payoff that includes court costs, and pay it before the sale date.
• Sell the house. A closing pays the back taxes from the sale proceeds, and you keep what is left after the taxes, any mortgage and the selling costs.
• If the owner died and the taxes lapsed after, deal with it through the estate. Our post on selling an inherited house covers who can sign.

We buy houses with years of back taxes on them. The title company pays the taxes at closing out of the price, and the payoff shows on the settlement statement line by line. If you are also behind on a mortgage, our post on the Tennessee foreclosure timeline covers that clock, and what an empty house costs shows what waiting adds.

This is general information, not legal or tax advice. Talk to a Tennessee attorney or CPA about your situation.