So what if the lien holder decides that they don't want the property and never apply for the deed? Does the original property owner retain ownership? Can they sell the property?
Eh? A lien holder can't just "apply for a deed". Do you mean what happens is a lien isn't satisfied but the lien holder never forecloses? In that case, ownership doesn't change and the lien remains in place. Yes, the owner can sell, but the lien would have to be satisfied to complete the transaction, assuming the buyer wanted a free and clear title.
Jon Holdman, Flying Phoenix LLC
Depends on the state statutes. Usually if the tax lien holder does not foreclose when the redemption period expires, the property is still in the name of the owner. They can sell if they want. But if the lien has not expired, the lien will be paid off at the closing and the lien holder gets their investment plus interest back.
Most states that sell tax liens or certificates have an expiration on a lien. If the lien holder never forecloses, they risk losing their entire investment if the lien expires on them.
Important to know the laws about tax liens in the state you are investing.
Sorry what I meant was after the final redemption date has passed the lien holder who at that time can petition for the deed decides that they don't want to, is there a specific time period in which they have to do so?
You are being a bit too vague and using some terms improperly.
What type of "Lien" are want to understand? A Tax Lien. A Mortgage Lien. A Mechanics Lien. An IRS Lien. The list can be long.
Some liens carry with them, the holder's right to foreclosure. Examples of that would be a Tax Lien [Certificate] and/or a Mortgage.
Foreclosure is the process of extinguishing all interested parties rights and interests, junior to the lien seniority, including the right of redemption. Not all junior interested parties have a right of redemption but most do.
The right of redemption is the window of time legally afforded to those junior interested parties [to the foreclosing lien] that allows such parties to pay the total due and regain the rights and interests which were granted with the original lien and thereby terminating that particular foreclosure process.
The right to foreclose granted by those liens is not a right to the real property title. That is, just because a Mortgage or Tax Lien can foreclose, they do not have any superior or expressed right to the title of the real property. The property is to be sold in a public forum, usually a Sheriff/Courthouse Auction to the highest bidder who exceeds the minimal bid set either by statue by Tax Lien or bid by Mortgage Lien.
So a redemption period only starts to tick away (if you will) upon the initiation of a foreclosure process. That redemption period can be pre or post sale depending on lien and state. The only thing the lien holder is entitled to is recovery of the amounts represented by the lien (including fees and interest, etc) not the property.
Does a lien holder have to initiate foreclosure? No.
Will some liens which give the right to foreclose expire? Yes, like a Tax Lien.
If foreclosure is not initiated then the bundle of rights and interests stays the same as when the Lien was granted (Mortgage) or imposed (Tax).
In Illinois the lien holder must file a petition for a tax deed between 3 and 6 months prior to the end of redemption. If the redemption period has expired and the lien holder did not file for a petition during his window, then the lien is expired and the original owner maintains ownership. 35 ILCS 200/22-10 and so on.
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