What Happens If I Don't Pay Property Taxes in Rhode Island?

If your real property taxes in Rhode Island are delinquent, the tax collector can sell your property, or part of it, at a tax sale. However, you'll get fair warning before a tax sale and the chance to get your home back afterward.

Under Rhode Island law, most people get at least one year to reclaim (or "redeem") the property even after someone else buys it at a tax sale.

How Do Property Taxes Work?

People who own real property have to pay property taxes. The government uses the money that these taxes generate to pay for schools, public services, libraries, roads, parks, and the like. Typically, the tax amount is based on a property's assessed value.

If you have a mortgage on your home, the loan servicer might collect money from you as part of the monthly mortgage payment to later pay the property taxes. The servicer pays the taxes on the homeowner's behalf through an escrow account. But if the taxes aren't collected and paid through this kind of account, the homeowner must pay them directly.

When homeowners don't pay their property taxes, the overdue amount becomes a lien on the property. A lien effectively makes the property act as collateral for the debt.

All states, including Rhode Island, have laws that allow the local government to sell a home through a tax sale process (or get title to the property in another way) to collect delinquent taxes.

How Do Property Tax Sales in Rhode Island Work?

If you get behind in paying your real property taxes in Rhode Island, the tax collector can sell your home, or a portion of the property, at a public auction. (R.I. Gen. Laws § 44-9-8.)

How a Tax Sale Auction in Rhode Island Works

At the public auction, the smallest undivided part of your property, but not less than 1%, or the whole parcel if no person offers to take an undivided part, will be sold to a new owner (the purchaser) for the owed amount of taxes, interest, assessments, and charges. (R.I. Gen. Laws § 44-9-8.)

After the auction, the purchaser gets a deed to your property, subject to your right of redemption (see below). (R.I. Gen. Laws § 44-9-12.)

Notice of a Tax Sale in Rhode Island

Before the sale, the tax collector must provide the homeowner with notice by mail, publication, and posting.

Notice by mail. The collector must send you a notice by first-class mail not fewer than 90 days before the sale. The collector must send a second notice by certified mail not fewer than 40 days before the sale. Or the collector must personally serve you notice, not less than 30 days before the sale. (R.I. Gen. Laws § 44-9-10.)

Notice by posting and publication. The collector must also post the notice publicly and publish it in a newspaper. (R.I. Gen. Laws § 44-9-9.)

Notice for people over 65 years old or disabled. If you're 65 years old or over (or if you suffer from a disability), you may designate a third party to receive your notice. You would do so by giving the tax assessor of the name and address of the designated person. (R.I. Gen. Laws § 44-9-10.)

Can I Get My Home Back After a Rhode Island Tax Sale?

Following the auction, the winning bidder gets a deed to the home, or a portion of the parcel depending on the situation, subject to the redemption period.

After the redemption period expires, the winning bidder then has to foreclose the right to redeem to get title to the property. (R.I. Gen. Laws § 44-9-12).

Redemption Period After a Property Tax Sale in Rhode Island

In Rhode Island, the purchaser must wait one year after the sale before starting the foreclosure to wipe out your right of redemption. (R.I. Gen. Laws § 44-9-25.) So, the redemption period generally lasts at least one year after the sale.

However, a petition to foreclose redemption may not be filed for five years, though, after a sale of certain owner-occupied property that the Rhode Island Housing and Mortgage Corporation acquires. (R.I. Gen. Laws § 44-9-25.)

Deadline to Redeem After a Property Tax Sale in Rhode Island

To begin the foreclosure, the purchaser files a petition (a lawsuit) with the court. (R.I. Gen. Laws § 44-9-25.) You can redeem up until the purchaser files the petition for foreclosure. (R.I. Gen. Laws § 44-9-21.)

If you want to redeem after the purchaser files the petition for foreclosure, you'll need to go through the court that's handling the foreclosure. (R.I. Gen. Laws § 44-9-29.) You should speak to an attorney as early as possible in the process if you want to redeem your home during the foreclosure. A lawyer can ensure that you take proper steps to complete the redemption.

Once the foreclosure is final, the winning bidder gets a deed to your property (or a portion of it), and you can't redeem. (R.I. Gen. Laws § 44-9-24.)

Vacating a Decree of Foreclosure After a Rhode Island Tax Sale

You might, under rare circumstances, be able to vacate the decree foreclosing the right of redemption. The only allowed reasons are if notice of the petition was inadequate or the taxes for which the property was sold had been paid or were not due and owing because the property was exempt from the payment of such taxes. But you must file a separate action within six months after the court entered the decree. (R.I. Gen. Laws § 44-9-24).

If you want to try to vacate the decree, talk to a lawyer.

How Much You'll Have to Pay to Redeem Your Rhode Island Property

If a third party, like an investor, is the winning bidder at the tax sale, you generally must pay:

• the purchase price
• any intervening taxes that the purchaser paid to the municipality
• interest at the rate of 1% per month
• costs the purchaser paid
• a penalty of 10% of the purchase price, in most cases, if you redeem within six months after the sale date, and
• an additional 1% of the purchase price for each following month. (R.I. Gen. Laws § 44-9-21).

If the city or town is the winning bidder at the tax sale, you'll have to pay similar charges. (R.I. Gen. Laws § 44-9-19).

What Options Do I Have If I Can't Afford to Pay My Property Taxes in Rhode Island?

While Rhode Island law provides a redemption period after a tax sale, it's better to take steps to make your taxes affordable before you get behind. For instance, you could:

• determine if you meet the requirements for a property tax abatement, or
• file an appeal to challenge the value of your home if you think the assessed amount is incorrect.

What Happens to My Mortgage in a Tax Sale?

Because a property tax lien has priority, mortgages (and deeds of trust) get wiped out if you lose your home through a tax sale process. So, If your loan isn't escrowed and you fail to pay the property taxes like you're supposed to, the loan servicer will usually advance money to pay delinquent property taxes to prevent a tax sale from happening.

Most mortgages have a clause allowing the lender to add the amount it paid to bring the taxes current to your loan balance. You'll then have to make repayment arrangements with the servicer or potentially face a foreclosure.

Getting Help

Talk to a foreclosure, tax, or real estate lawyer if you're facing a tax sale and foreclosure in Rhode Island and have questions about the process or need help redeeming your property.

To learn more about property taxes and other aspects of homeownership in general, get Nolo's Essential Guide to Buying Your First Home by Ilona Bray, J.D., Attorney Ann O'Connell, and Marcia Stewart.