BASIC INFORMATION ABOUT BUYING AND COLLECTING ON

BASIC INFORMATION ABOUT BUYING

AND COLLECTING ON CERTIFICATES OF

DELINQUENCY FOR

POTENTIAL THIRD PARTY PURCHASERS

PREPARED BY THE

OFFICE OF PROPERTY VALUATION

October 2023

TABLE OF CONTENTS

Introduction ......................................................................................................................... 1

The Kentucky Property Tax Calendar ................................................................................. 1

Registration Process for Third Party Purchasers at the State Level ................................... 4

County Clerk Tax Sale Dates ............................................................................................. 4

Registration at the County Clerk’s Office ........................................................................... 5

Priority Certificates of Delinquency .................................................................................... 5

Current Year Certificates of Delinquency With No Priority Claims ................................... 6

Registration Fees ................................................................................................................. 6

County Clerk Tax Sale Procedures ...................................................................................... 7

Actions After Purchasing a Certificate of Delinquency ...................................................... 8

Procedures to Follow When Notices are Returned by the Post Office ................................ 9

Installment Payment Plans ................................................................................................ 10

Foreclosure Actions ........................................................................................................... 10

Amounts That Can Be Collected by a Third Party on a Certificate of Delinquency ......... 11

Refunds to Third Party Purchasers .................................................................................... 12

Assignment of a Certificate of Delinquency ..................................................................... 13

More Resources Available for Potential Third Party Purchasers ...................................... 13

INTRODUCTION

A third party has had the ability to purchase delinquent real property tax bills (officially

known as certificates of delinquency) in Kentucky for many decades. However, it has only

been in the last 15 to 20 years that significant interest in acquiring these delinquencies has

developed. In response to this increased demand, significant legislative reforms have been

enacted that standardize the tax sale process throughout the State, require registration of

third party purchasers who meet certain thresholds, establish guidelines for the amounts of

pre-litigation fees that can be imposed, mandate that annual notices must be sent to

delinquent taxpayers and detail the information that must be included in those notices.

This manual will provide you with details on all of these requirements along with basic

information about the process to follow when it becomes necessary to enforce the lien of a

certificate of delinquency in an effort to help you decide if being a third party purchaser is

right for you.

Kentucky Property Tax Calendar

All potential third-party purchasers need to have an understanding of how the property tax

system in Kentucky works. The assessment date of both real and personal property is

January 1 of each year. The official name on the property tax bill is the January 1

property

owner; however, a tax bill can be sent “in care of” a new owner if the property transfers

during the year. The local official responsible for assessing all property in each county is

known as a property valuation administrator (PVA).

The PVA must submit the total assessments in each property class to the Department of

Revenue and, once the totals have been approved, the local taxing districts can then set

their individual tax rates. This work takes place during the late spring and summer months.

Tax bills are generally mailed out by October 1

or November 1

in each county, and they

are payable to the sheriff’s office. Tax bills become delinquent on January 1

and various

penalty amounts are added. The sheriff’s office transfers all delinquent tax bills to the

county clerk’s office as of the close of business on April 15

of each year. The tax bills

are then known as certificates of delinquency, and they represent a lien against the

corresponding real property.

After April 15

, the property owner can make payment to the county clerk’s office and

additional penalties, fees and interest will apply. The county attorney is responsible for

sending a notice within 30 days of the bills being received by the county clerk to each

delinquent taxpayer. If necessary, another notice is mailed by the county attorney within

60 days of the bills being transferred to the county clerk.

The certificates of delinquency are eligible to be sold to third party purchasers by the

county clerk 90 days after they have been received from the sheriff’s office. The actual tax

sale date for each county will be advertised in the local newspaper, on the county clerk’s

website and on the Department of Revenue’s website

http://revenue.ky.gov/property/pages/third-party-purchaser.aspx at least 30 days prior to

the sale date.

A diagram of the property tax calendar is shown on the following page.

KENTUCKY PROPERTY TAX CALENDAR

REAL ESTATE PERSONAL PROPERTY

Assessment Date

January 1

Listing Period

January 1 - March 1

January 1 - May 15

First Recap to Office of

Property Valuation

First Monday in April

Public Inspection of Tax

Roll/PVA Conferences

13 Days Beginning First

Monday in May (6 days per

week, including Saturday)

Final Recap to Office of

Property Valuation

No Later Than 6 Work Days

After the Close of Inspection

Property Valuation

Certification

Upon Completion of Action

by Department of Revenue

Upon Completion of Action

by Department of Revenue

Board of Assessment

Appeals

5 Days Beginning 25 to 35

Days After Inspection

Establishment of Local

Property Tax Rates

Within 45 Days of the

Department of Revenue’s

Certification of the County’s

Property Tax Roll

Within 45 Days of the

Department of Revenue’s

Certification of the County’s

Property Tax Roll

Tax Bills Delivered to

Sheriff

By September 15

Pay With Discount

By November 1

Pay Without Discount

November 2 - December 31

Tax Bills Delinquent

January 1

Pay With 5 Percent

Penalty

January 1 - January 31

Pay With 10 Percent

Penalty and 10 percent

Sheriff’s add-on fee.

After January 31

Transfer of Delinquent

Tax Bills from the Sheriff

to the County Clerk

April 15 - Sheriff collects tax

through the close of business.

April 15 - Sheriff collects tax

through the close of business.

County Clerk’s Sale of

Certificates of

Delinquency

July 14 through August 28*

Sheriff’s Settlement

By September 1

*Counties with delinquent unmined mineral or oil and gas tax bills have an additional 60

day time period to schedule their tax sale.

Registration Process for Third Party Purchasers at the State Level

All third party purchasers who plan on buying more than 3 certificates of delinquency in

any county, 5 certificates of delinquency statewide or investing more than $10,000 in

certificates of delinquency must register with the Department of Revenue. An application

is available on the Department’s website –http://revenue.ky.gov/property/pages/third-

party-purchaser.aspx. You will see a section devoted solely to third party purchasers and

this is where you will find the link to download an application.

The application requests various items of information to be provided about the third party

purchaser such as: type of entity, contact information, whether you are current on all taxes

owed to the State and if you are related to another third party purchaser. If the third party

purchaser is organized as a corporation, limited liability company or partnership, then

additional information about the entity and the individual owners and officers will need to

be provided.

The completed application, along with a registration fee of $250, is submitted to the

Department of Revenue for review. If there are questions, you will receive a follow up

email or telephone call from the Department. Upon completion of the review process, you

will receive a Certificate of Registration from the Department. All Certificates of

Registration expire on December 31

of the calendar year issued. Since there is a 60-day

waiting period from the time the application is received by the Department before the third

party will be eligible to begin making purchases, the Certificate will list the date purchases

may begin.

Once a third party is eligible to begin making purchases, any certificate of delinquency

from a prior year may be acquired at any time. Keep in mind that the current year

certificates of delinquency are not available for purchase until the date of the county clerk’s

tax sale and thereafter. For example, in 2024 a certificate of delinquency from 2022 or

earlier tax year can be purchased any time after the third party purchaser becomes eligible.

The 2023 certificates of delinquency will not be available until the county clerk’s tax sales

begin in July of 2024.

The registration process for a particular year opens in October of the previous year so that

any third-party purchaser wishing to have a Certificate that is effective on January 1 can

apply and meet the 60 day waiting period prior to January 1.

County Clerk Tax Sale Dates

Each county clerk must set a tax sale date on an annual basis. Tax sales can begin no earlier

than July 14

of each year. Most of the tax sales will be completed by the latter part of

August; however, there is a provision for counties with unmined coal or oil and gas

delinquent tax bills that allows a tax sale to be conducted in September or October due to

the delayed collection schedule for these types of bills.

Registration at the County Clerk’s Office

All third party purchasers wishing to participate in a particular county’s tax sale must

complete a registration form and submit it along with all required fees and deposits to the

county clerk’s office by the advertised deadline. The purchase thresholds in effect for

registration with the Department of Revenue do not apply when registering with the county

clerk. Therefore, even if you only want to purchase one or two certificates, you must timely

county clerk’s office by the deadline established:

The registration form that is used by the county clerk;

Copy of the registration certificate issued by the Department of Revenue (if

necessary);

A list of priority certificates of delinquency you intend to acquire (more details

about this can be found in the next section);

A list of current year certificates of delinquency you intend to acquire (also

detailed in a following section);

The applicable registration fees; and

All applicable deposit amounts.

Priority Certificates of Delinquency

When a third party has purchased a certificate of delinquency for a particular property in a

prior year, that third party will have first priority to acquire the current year’s certificate of

delinquency for the same property. A list of all certificates of delinquency upon which you

have a priority needs to compiled and submitted with your registration form to the county

clerk. The information to include on this list is as follows:

The current year’s tax bill number;

The name on the certificate of delinquency;

The amount due on the certificate of delinquency;

The prior year certificate of delinquency’s tax year and bill number;

The book and page number where the prior year certificate of delinquency is filed,

if applicable; and

The account or parcel identification number if used by the county to identify

specific properties.

The county clerk may also request a copy of the prior year certificate of delinquency to

ensure a priority exists.

If you do not list your priority claim with the county clerk, the certificate of delinquency

upon which you had a claim will be included in the pool of certificates to be sold and it

may be purchased by any third party.

A deposit of 100% of the value of each priority certificate of delinquency is required from

the third party purchaser and it must accompany the registration when it is submitted. The

county clerk can specify what forms of payment will be accepted.

Current Year Certificates of Delinquency With No Priority Claims

A separate list of certificates of delinquency for which a third party has no priority claim

must also be prepared and submitted to the county clerk with the registration form. This

list shall include the following information:

The tax bill number;

The taxpayer name;

The amount due on each certificate of delinquency; and

The account or parcel identification number if used by the county to identify

property.

A deposit of 25% of the total value of the certificates of delinquency on this list will be

required. Again, the county clerk can specify what forms of payment will be accepted.

Registration Fees

A registration fee up to a yearly maximum of $250.00 must be paid by a third party

purchaser no matter when a certificate of delinquency is acquired during the year. If a prior

year certificate of delinquency is purchased before the current year’s tax sale, a registration

fee of $10.00 per bill will be added to the total due. For certificates of delinquency

purchased at the tax sale, a fee of $5.00 for each certificate of delinquency included on the

priority list and $10.00 for each certificate of delinquency included on the purchaser’s

current year list will be required. Whenever the $250.00 maximum has been reached, no

further registration fees will be charged until the next calendar year.

After the tax sale in a county has been completed, any remaining certificates of delinquency

may be purchased at any time by any third party. If the $250.00 maximum has not been

met, a registration fee of $10.00 per bill will be imposed until the limit is reached.

County Clerk Tax Sale Procedures

On the day of the tax sale, all registered third party purchasers will report to the county

clerk’s office for instructions on where the sale will be held. County clerks are encouraged

to update the list of certificates of delinquency available for the tax sale the night before or

the morning of the tax sale. Some county clerks will provide paper copies of these lists

while in other counties you will need to go on-line to access the updated list. In addition,

payments can be made by a taxpayer right up to the time of the tax sale; therefore, the

county clerk may have more deletions to the list of available bills to announce.

After allocating the certificates of delinquency for which third party purchaser’s had a

priority claim, the remaining certificates will be sold in a predetermined lot size. The

selection order is determined by a random drawing at the beginning of the tax sale and this

order is followed in each round. If a registered purchaser is not present for the random

drawing but shows up late, he or she will be placed at the bottom of the selection list.

The certificates of delinquency shall be sold in the following lot sizes:

In counties with 500 or fewer certificates of delinquency to be sold, the

certificates may be sold in lots of up to 5;

In counties with more than 500 and less than 1,000 certificates of delinquency to

be sold, the certificates may be sold in lots of up to 10;

In counties with at least 1,000 and less than 2,500 certificates of delinquency to be

sold, the certificates may be sold in lots of up to 25;

In counties with at least 2,500 but not more than 7,500 certificates of delinquency

to be sold, the certificates may be sold in lots of up to 50; and

If a county has more than 7,500 certificates of delinquency available for sale, the

certificates may be sold in lots of no more than 50 for the first 4 rounds. For all

subsequent rounds, the certificates may be sold in lots not to exceed 2% of the

total number of certificates of delinquency available to be sold.

Many county clerks will sell one certificate of delinquency at a time for at least the first 2

or 3 rounds in an effort to ensure that all third party purchasers will have the opportunity

to acquire certificates that are high on their list.

Purchasers are eligible to select only those certificates included on their list of current year

certificates of delinquency that was previously submitted to the county clerk.

A purchaser may withdraw from the tax sale at any time prior to the completion of the tax

sale. If a purchaser acquires less than a full lot of certificates in three consecutive rounds,

the purchaser will be considered to have withdrawn from the sale after the third partial lot

purchase. No other purchaser can take the place of a withdrawing purchaser.

The county clerk may impose a reasonable time limit for purchasers to make their

selections during each round. Purchasers need to be alert while other third parties are

making selections so that certificates that have already been selected are not called when it

is your turn. If this occurs, the county clerk may or may not allow an alternative certificate

to be selected. The county clerk should make an announcement about how this situation

will be handled at the beginning of the tax sale.

The third party purchaser will pay for all certificates of delinquency acquired at the

conclusion of the tax sale. The county clerk will first apply the purchaser’s deposit to the

total amount due and additional amounts shall be paid in the manner required by the county

clerk. The total due will include all county clerks’ fees for the recording and assignment

of each certificate of delinquency. Any deposit amount remaining after the sale shall be

refunded to the third party purchaser within 10 business days after the sale.

After the tax sale, any remaining certificates of delinquency may be purchased at any time

by any third party purchaser. However, all third party purchasers must continue to meet

the State’s registration requirements and a registration fee of $10.00 per certificate of

delinquency must be paid to the county clerk up to the $250.00 maximum if that limit has

not already been reached.

Actions After Purchasing a Certificate of Delinquency

Within 50 days after receiving delivery of a certificate of delinquency from the county

clerk, the third party purchaser must send a notice of the purchase to the delinquent

taxpayer. Subsequent notices must be sent at least annually to the delinquent taxpayer.

Notices must be sent by certified mail with proof of mailing and need to include the

following information:

A statement that the certificate of delinquency is a lien of record against the

property;

That the certificate accrues simple interest at the rate of 1% per month;

A statement that if the certificate is not paid it will be subject to collection as

provided by law and that collection actions may include foreclosure;

A complete listing of the total due as of the date of the notice broken out between:

The purchase price of the certificate of delinquency;

Interest accrued subsequent to the purchase of the certificate; and

The fees imposed by the third-party purchaser.

If the third party purchaser was required to register with the Department of

Revenue, then the notice must also include a statement that the delinquent

taxpayer may make a written request for an installment payment plan.

In addition to the above information, the notice must also include the legal name of the

third party purchaser, the physical address of the third party, the mailing address for

payments if different than the physical address and the third party purchaser’s telephone

number.

A copy of the notice must also be sent to each mortgagee who holds a mortgage on the

property by certified mail with proof of mailing.

If the contact information changes, the third party purchaser is required to send a notice to

the delinquent taxpayer (by certified mail with proof of mailing) with the updated

information within 30 days of the change becoming effective. The third party purchaser

must also update the contact information with the appropriate county clerk(s) within 10

days of the change becoming effective. The failure to keep all information current will

result in the suspension of the accrual of all interest and fees until proper notice is given.

Procedures to Follow When Notices are Returned by the Post Office

Prior to sending a notice, the third party purchaser shall obtain from the property valuation

administrator (PVA) the most recent address for the property owner. This information can

be obtained through the PVA Office’s website, or a list may be submitted to the PVA office

and updated address information will be provided to the third party purchaser within 10

days. The PVA office is allowed to charge a fee of $2.00 for each address provided.

Any notices that are returned as undeliverable shall be resent by certified mail addressed

to the “Occupant” at the address of the property that is the subject of the certificate of

delinquency. These notices must be sent within 20 days of receipt of the returned notice.

If the third party purchaser is made aware of a more accurate address for the delinquent

taxpayer that is different from the address maintained by the PVA, a notice shall be sent to

the updated address and the PVA must be notified of the updated address as well.

If a certificate of delinquency that relates to oil and gas or unmined coal property is

acquired, the same general procedures need to be followed to obtain the best possible

mailing address; however, your requests need to be directed to the Department of Revenue

rather than the PVA. Address information requests need to be directed to:

Office of Property Valuation

501 High Street

Floor, Station 33

Frankfort, KY 40620

ATTN: Megan Greene

You may also send your information requests via email to [email protected]

Installment Payment Plans

Upon receipt of a written request from a delinquent taxpayer, a third party purchaser must

offer an installment payment plan. The minimum length of the payment plan is 12 months

unless both parties agree to a shorter term. The third party purchaser is entitled to a monthly

processing fee of $8.00 per month to offset the administrative cost of providing a payment

plan.

The Department of Revenue has developed a payment plan calculator that is posted at

http://revenue.ky.gov/property/pages/third-party-purchaser.aspx to assist third party

purchasers with this requirement. There are also detailed instructions on the data entry

needed to be done in order to arrive at an accurate payment plan calculation.

If a delinquent taxpayer defaults on a payment plan, the third party purchaser is entitled to

retain all payments received and that amount is applied to the outstanding balance due.

The third party purchaser is then free to pursue the appropriate legal action to enforce the

certificate of delinquency.

Foreclosure Actions

By statute, no enforcement collection actions can be taken until it has been at least one year

since the certificate in question became delinquent. Unless there has been a delay in the

county’s collection schedule, tax bills are considered delinquent on January 1

. Therefore,

the following January 1

marks the end of the one year tolling period on collection actions.

For example, the 2022 property tax bills became delinquent on January 1, 2023. No

enforcement actions - other than sending the required notices - can be taken until January

1, 2024.

After the expiration of the one year tolling period, a third party purchaser has 10 years to

initiate a foreclosure action. At least 45 days before starting a legal action, the third party

purchaser must send a notice to the taxpayer and a copy to each mortgagee by certified

mail informing them of the impending action. This notice must contain the same

information as the initial notice sent to the delinquent taxpayer. See the section titled

“Actions After Purchasing a Certificate of Delinquency”.

To initiate a foreclosure action, you will go through the Circuit Court of the county in

which the property is located. The Master Commissioner will have the property appraised

and set a time for the foreclosure sale. At the appointed time, the property is offered for

sale at public auction. The third party purchaser will be reimbursed out of the proceeds

from the sale. If the sale’s proceeds are insufficient to pay the third party purchaser in full,

a pro-rata distribution will be made. If the third party purchaser decides to bid at the auction

and is the high bidder, then the third party purchaser becomes the new owner of the

property.

The foreclosure process will take several months at a minimum and the information in this

section provides a very basic overview of the process. If the third party purchaser is not

an attorney, then legal counsel should be obtained prior to taking this action.

Amounts That Can Be Collected by a Third Party on a Certificate of Delinquency

KRS 134.452 governs the amounts that can be collected on a certificate of delinquency

after it has been acquired by a third party purchaser but before any litigation has been filed.

First, interest can be charged at the rate of 1% per month based upon the amount paid to

the county clerk for the certificate of delinquency beginning with the date of purchase.

Next, administrative fees incurred for preparing, recording and releasing an assignment of

a certificate of delinquency can be added in an amount not to exceed $115.00. Finally, pre-

litigation attorneys’ fees incurred may also be added to the total due; however, there is a

sliding scale to follow that is detailed below:

If the amount paid for the certificate is between $5 and $350, up to 100% of the

amount of the certificate can be added to the total due – not to exceed $350;

If the amount paid for the certificate is between $351 and $700, up to 80% of the

amount of the certificate can be added to the total due – not to exceed $560;

If the amount paid for the certificate exceeds $700, up to 70% of the amount of

the certificate can be added to the total due – not to exceed $700.

In addition, the statute contains a further limitation on the addition of pre-litigation

attorneys’ fees to the amount due on a certificate of delinquency. If you own more than

one certificate of delinquency against the same taxpayer, then the pre-litigation attorneys’

fees for all of the certificates of delinquency you own cannot exceed 1.5 times the

maximum amount permitted under the sliding scale detailed above.

As an example, if you paid $725 for one certificate and $750 for another certificate against

the same property owned by the taxpayer, the maximum amount for the higher dollar value

certificate can be used to compute the initial limit for pre-litigation attorneys’ fees -

$525.00 ($750 x 70%). This amount is then the basis for calculating the total amount that

can be added for these fees for all certificates owned against the same property - $787.50

($525.00 x 1.5).

This statute goes on to state that the pre-litigation attorneys’ fees that are calculated under

the method provided cannot be charged all at once, unless the amount of the certificate of

delinquency is $175 or less. Otherwise, these fees are added in $175 increments – up to

the maximum amount allowed – for each notice that is sent to the delinquent taxpayer, but

additional amounts cannot be added any more frequently than quarterly no matter how

many notices are sent.

When litigation becomes necessary, the third party purchaser may collect actual,

reasonable attorneys’ fees that arise due to the prosecution or the protection of a certificate

of delinquency that is involved in litigation. KRS 134.452(3)(b) states actual litigation fees

up to $2,000 may be considered reasonable as long as the work performed is properly

documented and the hourly rates imposed are customary for similar services done in the

area. Any fees of this type in excess of $2,000 will have to be authorized by the court.

Refunds to Third Party Purchasers

Refunds to third party purchasers are governed by KRS 134.551. When a certificate of

delinquency held by a third party purchaser is unenforceable because:

It is a duplicate certificate of delinquency;

The tax liability represented by the certificate of delinquency was paid prior to the

purchase of the certificate of delinquency;

All or a portion of the certificate of delinquency is exonerated;

The property to which the certificate of delinquency applies was not subject to taxes

as a matter of law as certified by the property valuation administrator; or

It should not have been sold since it met the requirements for inclusion on the list

of protected certificates of delinquency provided by the county attorney in

accordance with KRS 134.504 (10) (b);

the third party purchaser may apply to the county clerk for refund. The application for

refund must include written proof that one of the situations listed above exists.

Upon approval of the refund application, the county clerk is authorized to issue a refund of

the amount paid by the third party purchaser. The refund does NOT include the lien filing

fees paid by the third party purchaser.

If the county clerk does not have sufficient funds to make the refund, the clerk may do one

of the following:

Retain the approved refund claim and make the refund as soon as sufficient funds

are on hand; or

Provide a signed letter to the person due the refund which includes the amount due

from each taxing jurisdiction and fee office. The letter will also direct each taxing

jurisdiction and fee office to pay the appropriate amount due to the third party

purchaser.

When a refund is made to a third party purchaser, the county clerk shall issue and file a

release of the lien on the property that was subject to the certificate of delinquency. The

lien release and supporting documents are filed without a fee. The county clerk shall return

the lien release document to the taxpayer and provide a copy to the third party purchaser.

If a refund request is denied by the county clerk, the third party purchaser may appeal the

decision to the Kentucky Board of Tax Appeals.

Assignment of a Certificate of Delinquency

On occasion, a third party purchaser will assign a certificate of delinquency that has been

acquired to another third party purchaser. This is allowable under KRS 134.126; however,

the third party purchaser that is obtaining the lien in the assignment will need to meet the

State registration requirements that are in place for all third party purchasers who

participate in the tax sales. This means if the third party purchaser is obtaining – via an

assignment – more than 3 certificates of delinquency in a county or more than 5 certificates

of delinquency statewide or is spending more than $10,000 then the third party must be

registered with the Department of Revenue and eligible to purchase certificates of

delinquency. Proof of registration and the effective date purchases can begin should be

provided to the county clerk before any assignment is made. The county clerk shall charge

a fee of $34.00 to note and record the assignment.

More Resources Available for Potential Third Party Purchasers

The Department of Revenue’s website – http://revenue.ky.gov/property/pages/third-party-

purchaser.aspx - contains links to all of the various statutes and regulations that govern this

process. There are also links that will provide you with a list of the county clerk’s tax sale

dates, the website addresses used by the county clerks to advertise their certificates of

delinquency and other third party purchasers who have registered with the Department. As

noted in an earlier section of this brochure, a link to the application to be a registered

third party purchaser, an installment payment plan calculator and the accompanying

instructions are also provided.

After reviewing these materials, if you have any further questions, please do not hesitate

to contact Maurette Harris via email at [email protected] you may call her at 502-

564-7230.