Tax deed sales attract buyers for an obvious reason. Property routinely sells at the courthouse for a fraction of its value. What the auction price does not include is marketable title, and that is where most tax deed investors get their education.
The process, set out in Chapter 197, Florida Statutes, runs in two stages. When property taxes go unpaid, the county sells a tax certificate, which is a lien, to an investor who in effect pays the taxes in exchange for interest. If the taxes remain unpaid for two years, the certificate holder may apply for a tax deed, and the clerk of court auctions the property itself. The winning bidder receives a tax deed, which creates what amounts to a new title. Most prior interests, including mortgages, are extinguished by the sale, although certain governmental liens survive.
So why will no title company insure it on Tuesday morning? Because a tax deed is only as good as the notice that preceded it. The statutes require notice to the owner, lienholders, and others with a recorded interest, and constitutional due process stands behind those requirements. The United States Supreme Court held in Jones v. Flowers, 547 U.S. 220 (2006), that when mailed notice of a tax sale comes back undelivered, the government must take additional reasonable steps before selling. A former owner or mortgagee who was not properly noticed can attack the deed, and Florida gives challengers time to do it. Under section 95.192, Florida Statutes, an action to recover land conveyed by a tax deed is generally barred four years after the deed is recorded, provided the tax deed holder has taken possession. Until that period runs, the risk of a challenge hangs over the title, and title underwriters price risk for a living.
A tax deed buyer therefore has three realistic paths to marketable, insurable title. The first is a quiet title action under Chapter 65, Florida Statutes, naming the former owner and every extinguished interest holder, and obtaining a judgment confirming the tax deed. This is the cleanest route and typically takes a few months when uncontested. The second is patience: hold the property, maintain actual possession, and after the four-year statute has run many underwriters will insure the title based on the passage of time. The third is insuring over the risk. Several underwriters, working with specialized certification services, will review the clerk's tax deed file, verify that every required notice was properly given, and issue a policy without a lawsuit, sometimes within weeks. It costs more, but for an investor who wants to resell or refinance quickly, it is often worth it.
My advice to would-be bidders is unglamorous. Read the clerk's file before the auction, not after. Budget for the quiet title action as part of the purchase price. And remember that the discount you captured at the courthouse is not free money; it is compensation for the title work that still has to be done.
This article is provided for general information only and is not legal advice. Reading it does not create an attorney-client relationship. Every situation is different, and you should consult a Florida attorney about your specific circumstances.
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