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2010 Kentucky Tax Lien Investing Update

Services for Real Estate Pros with Greg Taylor and Associates, PLLC

Gregory T. Taylor, Esq.

306-B South 12th St.

P.O. Box 505

Murray, KY 42071

Ph/Fax (270) 761-4558

2010 Kentucky Certificate of Delinquency Update

DISCLAIMER: I’ve got to start with this first. This is not an exhaustive review of the statutes and is merely for informational purposes. Don’t take it as legal advice. There are still a lot of things to be fleshed out with this but it is good to know what is going on now. The recent overhaul of the Kentucky Certificate of Delinquency laws has resulted in a few more hoops for those of us interested in tax lien investing to jump through. I’ll be referring to the Certificates of Delinquency as “liens” throughout this summary. Here is what has remained the same:
  • 12% simple interest rate earned on amount paid for liens
  • Interest is accrued at 1% per month with any part of a month counting for the whole month.
  • In addition to the interest, tax lien purchasers may collect for expenses incurred in collecting the lien, including:
    • $100 administrative fee
    • Attorneys fees prior to initiating litigation (Mailing letters, fielding phone calls, generally handling the collection of the liens for a client)
      • Up to $350 for liens $350 or below (no more than 100% of cost of lien)
      • Up to $560 for liens $700 or below (no more than 80% of cost of lien)
      • Up to $700 for liens above $700 (no more than 70% of the cost of lien)
    • ALL attorneys fees and costs (providing they are reasonable) involved in foreclosing or otherwise collecting the lien through litigation
The best thing about this is that you can purchase the liens, and then hand off the entire collection process to an attorney such as myself with no direct expense to you. This includes drafting and mailing the letters required by statute as set forth below. You will get the full 12% return on your money without subtracting for fees and expenses. AND NOW FOR THE JUMPING THROUGH HOOPS PART! Here are the relevant changes and the new tax lien investment and collection procedures:
  1. Registration to purchase tax liens.
    1. Anyone who is going to buy 5 or more liens statewide OR 3 in any one county OR spend more than $10,000 on liens statewide MUST register with the Kentucky Department of Revenue.
    2. You will have to pay an administrative fee to register to buy the tax liens.
    3. You will have to be in good standing with regard to taxes owed to the state and prior business record (this is done to prevent some of the predatory tax lien investors from investing in this state again).
  1. Tax Lien Purchasing Procedure
    1. The county clerk will now handle the sale of all tax liens. They will no longer be purchased at the Sheriff’s office.
    2. The Department of Revenue will determine and advertise the dates of the sales in each county and the dates and times will be staggered so that people can purchase liens in multiple counties.
    3. The dates of the tax sales will fall between July 15 and August 31 of each year and will be advertised at least 30 days in advance in the paper.
    4. You will have to register at least one week before each with each county clerk in order to buy liens and you will likely have to put an advance deposit down. You may have to pay a registration fee to the clerk for the right to purchase liens at the sale, up to $250.00 per county.
    5. The county clerks will be allowed to refuse to sell liens involved in litigation or that are likely to be duplicate bills. This will cut down on the amount of liens that are refunded because they are uncollectable.
    6. The Department of Revenue will determine the purchasing procedure that will be used statewide and it will most likely involve some type of lottery system so that multiple purchasers will have an equal chance of buying liens.
    7. One person may not represent multiple entities at the tax sale and no related entities shall be allowed to purchase liens. This prevents the big buyers from flooding the sale with their proxies and buying the bulk of the liens.
    8. If you hold a lien on a property from a prior year, you will be allowed first chance to purchase the lien on the property for the current year.
  2. Notice Requirements and Collection Procedures on Tax Liens
    1. Address Collection from PVA – You must do this prior to sending out the letters below.
  1. i. You must contact the county’s PVA and get the most recent address for each property owner by sending them a list of the property addresses and map numbers on the properties that you purchased liens for at the tax sale.
  2. ii. The PVA will respond within 10 days and will charge you $2 per address.
  3. iii. If you send out any of the letters set forth below and they are returned as undeliverable, you MUST re-send (with proof of mailing) the letters to the property address (NOT the owner’s mailing address that you got from PVA) with the letters addressed to “Occupant” within 10 days of having the mail returned to you.
  4. i. The certificate is a lien of record against the property
  5. ii. The lien is accruing 12% interest as set forth above
  6. iii. If the lien isn’t paid, it will be subject to collection as provided by law
  7. iv. A detailed payoff statement as of the date of the notice, showing purchase price, interest, and fees and costs (including statute references to why those fees and costs are collectible).
  8. v. Contact information for the lien buyer – Name, physical and mailing addresses, and telephone number.
  10. i. Before you can initiate foreclosure suit, you have to send out a notice at least 45 days prior to filing suit that lets the taxpayer know that you intend to file suit to collect, ALONG WITH all of the information required in the first letter above. You must send this letter first class with proof of mailing.
    1. First Letter – You must send a letter out (first class with proof of mailing via the USPS or Affidavit) within 50 days of purchasing the lien that tells the taxpayer the following:
    1. Foreclosure Notice – You have to wait 1 year before you can foreclose and you must foreclose between the first year and the 11th year after buying the lien.
  1. Miscellaneous
    1. If you purchase a duplicate bill or a bill that is otherwise uncollectible, you may apply to the county clerk for a refund and the county clerk will refund your initial payment, but NOT any interest or expenses.
Please call if you are interested in pursuing tax lien investing. I am currently handling several of these liens for various clients and would love to help you if you so desire. I hope this has been informative and beneficial for you and wish everyone great success in 2010! http://gregtaylorlaw.com

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