The Appellate Court of Maryland has clarified which unpaid taxes and water bills must be paid when an owner seeks to redeem a property sold at tax sale, providing new guidance for local governments that administer the process.

In an August 26 decision, the court held that property taxes accruing after a tax sale must be paid at redemption only if they are already in arrears. The court also held that unpaid water charges may be included in the redemption amount when they are in arrears and have become a lien on the property.

The case, Vertex TL LLC v. 2921-2923 McElderry Street LLC, arose from the 2023 tax sale of a Baltimore City property. The owner later paid the amount the City identified as necessary to redeem the property, but the tax sale certificate holder challenged the redemption on the grounds that additional property taxes and water charges remained outstanding.

The court found that the additional property taxes need not be paid because they had not yet become delinquent when the owner redeemed the property. Although the taxes had become due, Maryland law requires payment of taxes that are in arrears, not simply taxes that have come due since the tax sale.

The court treated the water bill differently. It held that water charges accruing after a tax sale can qualify as delinquent taxes when they are in arrears and have become a lien on the property, even though Baltimore City generally cannot sell residential property at tax sale solely because of unpaid water or sewer charges.

The ruling also confirms that tax sale certificate holders can challenge whether a property owner satisfied the statutory requirements for redemption. The court sent the case back to the Circuit Court for Baltimore City to determine whether the outstanding water charges had become delinquent and constituted a lien when the property was redeemed.

Under Maryland law, counties and Baltimore City must collect delinquent real property taxes and other unpaid charges, including liens against the property. These properties are typically scheduled for tax sale no later than two years after the taxes become delinquent.

MACo strongly prefers that homeowners receive all counseling, education, information, support, and additional assistance when appropriate to help them pay on time and avoid going through tax sale. To that end, MACo has supported legislation establishing the Homeowner Protection Program and several bills to reform the tax sale process to ensure its fairness.

The decision provides county finance offices with clearer guidance on calculating redemption amounts, particularly when new property taxes or water charges accrue between the tax sale and redemption. The opinion also recognizes separate statutory requirements for owner-occupied residential properties, which were not at issue because an LLC owned the property in this case.

Stay tuned to Conduit Street for more information.

Useful Links

Vertex TL LLC v. 2921-2923 McElderry Street LLC, Appellate Court of Maryland

Maryland Tax-Property Article § 14-828, Redemption Requirements