2015 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 is no attorney-client relationship generated merely by you reading this update.

 

In 2009, the Kentucky legislature passed a bill that dramatically increased the regulatory environment affection Kentucky Certificates of Delinquency.  More changes have occcurred each year and now, in 2015, we have what appears to be a relatively stable set of laws. This summary is an attempt to highlight the main points and educate those new to Kentucky Certificates of Delinquency on how the process works.  I’ll be referring to the Certificates of Delinquency as “liens” throughout this summary. 

 

Here are the basics of the law:

·        12% simple interest rate earned on amount paid for liens (KRS 134.125)

·        Interest is accrued at 1% per month with any part of a month counting for the whole month. (KRS 134.125)

·        In addition to the interest, tax lien purchasers may collect for expenses incurred in collecting the lien (KRS 134.452), including:

 As we are going to see below, there are substantial requirements for anybody that purchases a tax lien in Kentucky, and in my opinion, the statutes outlined above show that the legislature envisioned that most investors would purchase the liens, and then hand off the entire collection process to an attorney.  The good news for investors is that they are able to recoup all of their direct costs, including attorneys fees, associated with investing in these liens.  Moreover, with a competent attorney handling the file there is more likelihood that these liens will be collected quickly.

Here are the relevant changes and the new tax lien investment and collection procedures: 

  1. Registration to purchase tax liens (KRS 134.129).
    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 of $250.00 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 your prior business record.
  1. Tax Lien Purchasing Procedure (KRS 134.128)
    1. The county clerk will handle the sale of all tax liens.  
    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 14 and October 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 will have to pay a registration fee to the clerk for the right to purchase liens at the sale, $10.00 for each bill on your list, up to $250.00 per county.  The deposit requirements and deadlines to register vary from county to county, so you will want to check with each county clerk to see what procedure they will use.
    5. The county clerks are 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 has set a purchasing procedure that is used statewide.  The procedure is a lottery system similar to a professional sports draft that ensures that each purchaser who registers will have an equal chance of buying liens.
    7. No related entities shall be allowed to purchase liens at the tax sale.
    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.
  1. Notice Requirements and Collection Procedures on Tax Liens (KRS 134.490)
    1. Address Collection from PVA – The statute says you shall do this, even if you have the actual mailing address of the property owner. 

                                                               i.      You mus get the most recent address for each property owner from the PVA.

                                                                                                   

    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:

                                                               i.      The certificate is a lien of record against the property

                                                             ii.      The lien is accruing 12% interest as set forth above

                                                            iii.      If the lien isn’t paid, it will be subject to collection as provided by law

                                                           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). Also, you must include a statement that, upon written request and the payment of a processing fee, you will offer the taxpayer a payment plan. The requirement to offer a payment plan expires 12 months from the date of purchase of the lien.

                                                             v.      Contact information for the lien buyer – Name, physical and mailing addresses, and telephone number.

 

    1. Foreclosure Notice – You have to wait at least 1 year after the taxes become delinquent before you can foreclose and you must foreclose between the first year and the 11th year after the taxes become delinquent.  (KRS 134.546)

                                                               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. 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.

 I hope this recap of the current law has been beneficial to you and please call me at 270-761-4558 or email me at greg@gregtaylorlaw.com if you have additional questions.