Delinquencies other than property taxes may be sold at a tax sale. This includes unpaid utilities, sewer, water or garbage bills or any special assessments. Basically any unpaid bills that are payable to the local government (township, municipality, county or taxing district) and go unpaid can be sold at the tax sale as a tax lien. Just as with unpaid taxes, the lien-holder is in first position and can foreclose on the property if the lien is not redeemed within the redemption period. The lien-holder also has the ability to pay the subsequent utility charges (and even the subsequent taxes) if the property owner does not pay them on time.
Many states give you the opportunity to pay the subsequent taxes and collect the maximum or default interest on your subs. The exception to this is Florida: Florida counties do not allow you to pay the subsequent taxes and they will sell the lien each year in the tax sale. So you don’t get that opportunity there, you just have to try to purchase the lien each year.
Utility liens can be a good investment for a couple of reasons. First the delinquent amounts for these liens are usually less than they are for the taxes, so you need less money to purchase a utility lien than you do to purchase a tax lien. And because these liens are smaller, the institutional investors rarely bid on them, so they are a little less competitive than the larger tax liens. Secondly when you own a utility lien, you can pay the subsequent taxes, as well as the subsequent sewer charges if the owner doesn’t pay them. I’ve had a few liens that I originally purchased as small sewer liens, and then later when the owner of the property stopped paying the taxes, I was able to pay the overdue taxes as well as the sewer amounts. This added thousands of dollars to my original lien. Since this was a New Jersey tax lien I was able to get 18% on all of my subsequent tax payments!
Buying utility liens is one the strategies that I use to keep my tax lien portfolio in the double digits!!