Skip to content
Quick Start for:
Title 1. Property Tax Code
Subtitle E. Collections and Delinquency

Chapter 34. Tax Sales and Redemption

Subchapter A. Tax Sales

Sec. 34.01. Sale of Property.
Sec. 34.015. Persons Eligible to Purchase Real Property.
Sec. 34.02. Distribution of Proceeds.
Sec. 34.03. Disposition of Excess Proceeds.
Sec. 34.04. Claims for Excess Proceeds.
Sec. 34.05. Resale by Taxing Unit.
Sec. 34.051. Resale by Taxing Unit for Purpose of Urban Development.
Sec. 34.06. Distribution of Proceeds of Resale.
Sec. 34.07. Subrogation of Purchaser at Void Sale.
Sec. 34.08. Challenge to Validity of Tax Sale.

[Sections 34.09 to 34.20 reserved for expansion]

Sec. 34.03. Disposition of Excess Proceeds.

(a) The clerk of the court shall:

(1) if the amount of excess proceeds is more than $25, before the 31st day after the date the excess proceeds are received by the clerk, send by certified mail, return receipt requested, a written notice to the former owner of the property, at the former owner's last known address according to the records of the court or any other source reasonably available to the court, that:

(A) states the amount of the excess proceeds;

(B) informs the former owner of that owner's rights to claim the excess proceeds under Section 34.04; and

(C) includes a copy or the complete text of this section and Section 34.04; and

(2) regardless of the amount, keep the excess proceeds paid into court as provided by Section 34.02(c) for a period of two years after the date of the sale unless otherwise ordered by the court.

(b) If no claimant establishes entitlement to the proceeds within the period provided by Subsection (a), the clerk shall distribute the excess proceeds to each taxing unit participating in the sale in an amount equal to the proportion its taxes, penalties, and interests bear to the total amount of taxes, penalties, and interest due all participants in the sale.

(c) The clerk shall note on the execution docket in each case the amount of the excess proceeds, the date they were received, and the date they were transmitted to the taxing units participating in the sale.

Amended by 1981 Tex. Laws (1st C.S.), p. 169, ch. 13, Sec. 132; amended by 1999 Tex. Laws, p. 4109, ch. 1185, Sec. 1.

Notes:

A taxing unit must deposit all the excess proceeds from the sale of a tax foreclosed property into the registry to the court for proper disbursement to the property owner. This is true even if the property was first offered for sale two years (the redemption time period) before the actual sale of the foreclosed land. Syntax, Inc. v. Hall, 899 S.W.2d 189 (Tex. 1995).

Sec. 34.04. Claims for Excess Proceeds.

(a) A person, including a taxing unit, may file a petition in the court that ordered the seizure or sale setting forth a claim to the excess proceeds. The petition must be filed before the second anniversary of the date of the sale of the property. The petition is not required to be filed as an original suit separate from the underlying suit for seizure of the property or foreclosure of a tax lien on the property but may be filed under the cause number of the underlying suit.

(b) A copy of the petition shall be served, in the manner prescribed by Rule 21a, Texas Rules of Civil Procedure, as amended, or that rule's successor, on all parties to the underlying action not later than the 20th day before the date set for a hearing on the petition.

(c) At the hearing the court shall order that the proceeds be paid according to the following priorities to each party that establishes its claim to the proceeds:

(1) to the tax sale purchaser if the tax sale has been adjudged to be void and the purchaser has prevailed in an action against the taxing units under Section 34.07(d) by final judgment;

(2) to a taxing unit for any taxes, penalties, or interest that have become due or delinquent on the subject property subsequent to the date of the judgment or that were omitted from the judgment by accident or mistake;

(3) to any other lienholder, consensual or otherwise, for the amount due under a lien, in accordance with the priorities established by applicable law;

(4) to a taxing unit for any unpaid taxes, penalties, interest, or other amounts adjudged due under the judgment that were not satisfied from the proceeds from the tax sale; and

(5) to each former owner of the property, as the interest of each may appear.

(d) Interest or costs may not be allowed under this section.

(e) An order under this section is appealable.

(f) A person may not take an assignment of an owner's claim to excess proceeds unless:

(1) the assignment is taken on or after the 36th day after the date the excess proceeds are deposited in the registry of the court;

(2) the assignment is in writing and signed by the assignor; and

(3) the assignment document contains a sworn statement by the assignor affirming:

(A) that the assignment was given voluntarily;

(B) the date on which the assignment was made and that the date was not earlier than the 36th day after the date the excess proceeds were deposited in the registry of the court;

(C) that the assignor has received the notice from the clerk required by Section 34.03;

(D) the nature and amount of consideration given for the assignment;

(E) the circumstances under which the excess proceeds are in the registry of the court;

(F) the amount of the claim to excess proceeds in the registry of the court;

(G) that the assignor has made no other assignments of the assignor's claim to the excess proceeds; and

(H) that the assignor knows that the assignor may retain counsel.

(g) An assignee who obtains excess proceeds without complying with Subsection (f) is liable to the assignor for the amount of excess proceeds obtained plus attorney's fees and expenses.

(h) An assignee who files a petition setting forth a claim to excess proceeds must attach a copy of the assignment document and produce the original of the assignment document in court at the hearing on the petition. If the original assignment document is lost, the assignee must obtain the presence of the assignor to testify at the hearing.

(i) A fee charged to obtain excess proceeds for an owner may not be greater than 25 percent of the amount obtained or $1,000, whichever is less.

Amended by 1983 Tex. Laws, p. 4829, ch. 851, Sec. 26; amended by 1999 Tex. Laws, p. 4109, ch. 1185, Sec. 2; amended by 1999 Tex. Laws, p. 5107, ch. 1481, Sec. 26; amended by 2001 Tex. Laws, p. 4301, ch. 1420, Sec. 18.007 and by p. 4828, ch. 1430, Sec. 27; amended by HB 3419, 78th Tex. Leg., 2003, effective June 18, 2003.

Notes:

Taxing units may recover excess proceeds for delinquent taxes accrued on the property subsequent to the issuance of the judgment authorizing the sale. Hall v. Aldine Independent School District, 95 S.W.3d 485 (Tex. App.-Houston [1st Dist.] 2002, pet. denied).

The 2001 enactment of Section 34.04 pertaining to the assignment of an owner's claim to excess proceeds from a tax sale did not apply to previously issued disposition orders releasing proceeds. Loera v. Interstate Inv. Corp., 93 S.W.3d 224 (Tex. App.-Houston [14th Dist.] 2002, pet. denied).

The application of excess proceeds from a tax sale on one property to a deficiency on another property is permitted because they were both included in the foreclosure judgment. The proceeds could be used for any unpaid taxes, penalties, interest and other amounts adjudged due in the judgment. Nipper-Bertram Trust v. Aldine Independent School District, 76 S.W.3d 788 (Tex. App.-Houston [14th Dist.] 2002, pet. denied). Sec. 34.04(a), Tax Code, does not require a claimant to file a new lawsuit, separate from the underlying action to foreclose the tax lien, to recover excess tax proceeds. A claimant filing a petition to recover excess tax proceeds must serve a copy of the petition on the county or district attorney and all parties to the suit that ordered the sale in accordance with Rule 21a, Texas Rules of Civil Procedure. Op. Tex. Att'y Gen. No. DM-195 (1993).

Sec. 34.05. Resale by Taxing Unit.

(a) If property is sold to a taxing unit that is a party to the judgment, the taxing unit may sell the property at any time by public or private sale. In selling the property, the taxing unit may, but is not required to, use the procedures provided by Section 263.001, Local Government Code, or Section 272.001, Local Government Code. The sale is subject to any right of redemption of the former owner. The redemption period begins on the date the deed to the taxing unit is filed for record.

(b) Property sold pursuant to Subsections (c) and (d) of this section may be sold for any amount. This subsection does not authorize a sale of property in violation of Section 52, Article III, Texas Constitution.

(c) The taxing unit purchasing the property by resolution of its governing body may request the sheriff or a constable to sell the property at a public sale. If the purchasing taxing unit has not sold the property within six months after the date on which the owner's right of redemption terminates, any taxing unit that is entitled to receive proceeds of the sale by resolution of its governing body may request the sheriff or a constable in writing to sell the property at a public sale. On receipt of a request made under this subsection, the sheriff or a constable shall sell the property as provided by Subsection (d), unless the property is sold under Subsection (h) or (i) before the date set for the public sale.

(d) Except as provided by this subsection, all public sales requested as provided by Subsection (c) shall be conducted in the manner prescribed by the Texas Rules of Civil Procedure for the sale of property under execution. The notice of the sale must contain a description of the property to be sold, the number and style of the suit under which the property was sold at the tax foreclosure sale, and the date of the tax foreclosure sale. The description of the property in the notice is sufficient if it is stated in the manner provided by Section 34.01(f). If the commissioners court of a county by order specifies the date or time at which or location in the county where a public sale requested under Subsection (c) shall be conducted, the sale shall be conducted on the date and at the time and location specified in the order. The acceptance of a bid by the officer conducting the sale is conclusive and binding on the question of its sufficiency. An action to set aside the sale on the grounds that the bid is insufficient may not be sustained in court, except that a taxing unit that participates in distribution of proceeds of the sale may file an action before the first anniversary of the date of the sale to set aside the sale on the grounds of fraud or collusion between the officer making the sale and the purchaser. On conclusion of the sale, the officer making the sale shall prepare a deed to the purchaser. The taxing unit that requested the sale may elect to prepare a deed for execution by the officer. If the taxing unit prepares the deed, the officer shall execute that deed. An officer who executes a deed prepared by the taxing unit is not responsible or liable for any inconsistency, error, or other defect in the form of the deed. As soon as practicable after a deed is executed by the officer, the officer shall either file the deed for recording with the county clerk or deliver the executed deed to the taxing unit that requested the sale, which shall file the deed for recording with the county clerk. The county clerk shall file and record each deed under this subsection and after recording shall return the deed to the grantee.

(e) The presiding officer of a taxing unit selling real property under Subsection (h) or (i), under Section 34.051, or under Section 253.010, Local Government Code, or the sheriff or constable selling real property under Subsections (c) and (d) shall execute a deed to the property conveying to the purchaser the right, title, and interest acquired or held by each taxing unit that was a party to the judgment foreclosing tax liens on the property. The conveyance shall be made subject to any remaining right of redemption at the time of the sale.

(f) An action attacking the validity of a resale of property pursuant to this section may not be instituted after the expiration of one year after the date of the resale.

(g) A taxing unit to which property is bid off may recover its costs of upkeep, maintenance, and environmental cleanup from the resale proceeds without further court order.

(h) In lieu of a sale pursuant to Subsections (c) and (d) of this section, the taxing unit that purchased the property may sell the property at a private sale. Consent of each taxing unit entitled to receive proceeds of the sale under the judgment is not required. Property sold under this subsection may not be sold for an amount that is less than the lesser of:

(1) the market value specified in the judgment of foreclosure; or

(2) the total amount of the judgments against the property.

(i) In lieu of a sale pursuant to Subsections (c) and (d) of this section, the taxing unit that purchased the property may sell the property at a private sale for an amount less than required under Subsection (h) of this section with the consent of each taxing unit entitled to receive proceeds of the sale under the judgment. This subsection does not authorize a sale of property in violation of Section 52, Article III, Texas Constitution.

Amended by 1983 Tex. Laws, p. 4829, ch. 851, Sec. 27; amended by 1995 Tex. Laws, p. 3239, ch. 499, Sec. 1; amended by 1997 Tex. Laws, p. 1376, ch. 310, Sec. 1; by p. 2356, ch. 712, Secs. 3 and 4; by p. 2855, ch. 906, Sec. 9; by p. 4247, ch. 1111, Secs. 5 and 8; by p. 4300, ch. 1136, Sec. 2; and, by p. 4595, ch. 1192, Sec. 2; amended by 1999 Tex. Laws, p. 359, ch. 62, Sec. 16.07; amended by 1999 Tex. Laws, p. 5107, ch. 1481, Secs. 27 to 29; amended by 2001 Tex. Laws, p. 4828, ch. 1430, Sec. 28.

Cross References:

Alternate manner of sale, see Sec. 34.015.

Notes:

HB 2587, 75th Tex. Leg., 1977, effective September 1, 1997, repealed subsection (g). However, HB 110, 75th Tex. Leg., 1977, effective June 16, 1997, and HB 3306, 75th Tex. Leg., 1977, effective January 1, 1998, amended this same subsection (g). Text shown is the amended subsection (g).

A taxing unit obtained a delinquent tax judgment against a property with a market value of more than $1 million. At the foreclosure sale, a third party bid $360 for the property, and the sheriff sold it to him as the highest bidder. The taxing unit then moved to have the sale set aside. The third party bidder challenged this action claiming that a property must be sold for no less than the lower of the delinquency amount or the market value of the property only when the taxpayer or the governmental units were attempting to buy the property. The Supreme Court set aside the sale stating that the restriction applied to all purchasers. Clint Independent School District v. Cash Investments, Inc., 970 S.W.2d 535 (Tex. 1998).

A taxing unit does not have authority to adopt a "blanket" resolution for reselling tax foreclosure property as directed by the taxing unit's private tax attorneys. Section 34.05(c) does not prohibit a taxing unit from adopting a standing resolution directing the sheriff or a constable to resell at a public sale foreclosed property that the taxing unit acquires. Unless expressly authorized by the legislature, a governmental entity may not delegate its legislatively entrusted authority to another entity. Neither Section 34.05(c) or any other statutory provision t authorizes the taxing unit to delegate its property-resale-request authority. Op. Tex. Att'y Gen. No. JC-377 (2001).

Property purchased at tax foreclosure sale by taxing unit may be resold at private sale. Op. Tex. Att'y Gen. No. JM-1232 (1990).

Sec. 34.051. Resale by Taxing Unit for Purpose of Urban Development.

(a) A municipality is authorized to resell tax foreclosed property for less than the market value specified in the judgment of foreclosure or less than the total amount of the judgments against the property if consent to the conveyance is evidenced by an interlocal agreement between the municipality and each taxing unit that is a party to the judgment, provided, however, that the interlocal agreement complies with the requirements of Subsection (b).

(b) Any taxing unit may enter into an interlocal agreement with the municipality for the resale of tax foreclosed properties to be used for a purpose consistent with the municipality's urban redevelopment plans or the municipality's affordable housing policy. If the tax foreclosed property is resold pursuant to this section to be used for a purpose consistent with the municipality's urban redevelopment plan or affordable housing policy, the deed of conveyance must refer to or set forth the applicable terms of the urban redevelopment plan or affordable housing policy. Any such interlocal agreement should include the following:

(1) a general statement and goals of the municipality's urban redevelopment plans or affordable housing policy, as applicable;

(2) a statement that the interlocal agreement concerns only tax foreclosed property that is either vacant or distressed and has a tax delinquency of six or more years;

(3) a statement that the properties will be used only for a purpose consistent with an urban redevelopment plan or affordable housing policy, as applicable, that is primarily aimed at providing housing for families of low or moderate income;

(4) a statement that the principal goal of the interlocal agreement is to provide an efficient mechanism for returning deteriorated or unproductive properties to the tax rolls, enhancing the value of ownership to the surrounding properties, and improving the safety and quality of life in deteriorating neighborhoods; and

(5) a provision that all properties are sold subject to any right of redemption.

(c) The deed of conveyance of property sold under this section conveys to the purchaser the right, title, and interest acquired or held by each taxing unit that was a party to the judgment of foreclosure, subject to any remaining right of redemption at the time of the sale.

(d) An action attacking the validity of a sale of property pursuant to this section may not be instituted after the expiration of one year after the date of the sale and then only after the unconditional tender into the registry of the court of an amount equal to all taxes, penalties, interest, costs, and post-judgment interest of all judgments on which the original foreclosure sale was based.

Added by 1997 Tex. Laws, p. 4301, ch. 1136, Sec. 3; amended by 2001 Tex. Laws, p. 1513, ch. 819, Sec. 1 and p. 4829, ch. 1430, Sec. 29.

Cross References:

Alternate manner of sale, see Sec. 34.015.

Sec. 34.06. Distribution of Proceeds of Resale.

(a) The proceeds of a resale of property purchased by a taxing unit at a tax foreclosure sale shall be paid to the purchasing taxing unit.

(b) The proceeds of the resale shall be distributed as required by Subsections (c)-(e).

(c) The purchasing taxing unit shall first retain an amount from the proceeds to reimburse the unit for reasonable costs, as defined by Section 34.21, incurred by the unit for:

(1) maintaining, preserving, and safekeeping the property;

(2) marketing the property for resale; and

(3) costs described by Subsection (f).

(d) After retaining the amount authorized by Subsection (c), the purchasing taxing unit shall then pay all costs of the suit and the sale of the property in the same manner and in the same order of priority as provided by Sections 34.02(b)(1)-(5).

(e) After making the distribution under Subsection (d), any remaining balance of the proceeds shall be paid to each taxing unit participating in the sale in an amount equal to the proportion each participant's taxes, penalties, and interest bear to the total amount of taxes, penalties, and interest adjudged to be due all participants in the sale.

(f) The purchasing taxing unit is entitled to recover from the proceeds of a resale of the property any cost incurred by the taxing unit in inspecting the property to determine whether there is a release or threatened release of solid waste from the property in violation of Chapter 361, Health and Safety Code, or a rule adopted or permit or order issued by the Texas Natural Resource Conservation Commission under that chapter, or a discharge or threatened discharge of waste or a pollutant into or adjacent to water in this state from a point of discharge on the property in violation of Chapter 26, Water Code, or a rule adopted or permit or order issued by the commission under that chapter, and in taking action to remove or remediate the release or threatened release or discharge or threatened discharge regardless of whether the taxing unit:

(1) was required by law to incur the cost; or

(2) obtained the consent of each taxing unit entitled to receive proceeds of the sale under the judgment of foreclosure to incur the cost.

Amended by 1997 Tex. Laws, p. 105, ch. 38, Sec. 1; by p. 2856, ch. 906, Sec. 10; and by p. 2900, ch. 914, Sec. 3; amended by 1999 Tex. Laws, p. 5108, ch. 1481, Sec. 30; amended by HB 3419, 78th Tex. Leg., 2003, effective June 18, 2003.

Notes:

A taxing unit must deposit all the excess proceeds from the sale of a tax foreclosed property into the registry to the court for proper disbursement to the property owner. This is true even if the property was first offered for sale two years (the redemption time period) before the actual sale of the foreclosed land. Syntax, Inc. v. Hall, 899 S.W.2d 189 (Tex. 1995).

Sec. 34.07. Subrogation of Purchaser at Void Sale.

(a) The purchaser at a void or defective tax sale or tax resale is subrogated to the rights of the taxing unit in whose behalf the property was sold or resold to the same extent a purchaser at a void or defective sale conducted in behalf of a judgment creditor is subrogated to the rights of the judgment creditor.

(b) Except as provided by Subsection (c), the purchaser at a void or defective tax sale or tax resale is subrogated to the tax lien of the taxing unit in whose behalf the property was sold or resold to the same extent a purchaser at a void or defective mortgage or other lien foreclosure sale is subrogated to the lien of the lienholder, and the purchaser is entitled to a reforeclosure of the lien to which the purchaser is subrogated.

(c) If the purchaser at a void or defective tax sale or tax resale paid less than the total amount of the judgment against the property, the purchaser is subrogated to the tax lien only in the amount the purchaser paid at the sale or resale.

(d) In lieu of pursuing the subrogation rights provided by this section to which a purchaser is subrogated, a purchaser at a void tax sale or tax resale may elect to file an action against the taxing units to which proceeds of the sale were distributed to recover an amount from each taxing unit equal to the distribution of taxes, penalties, interest, and attorney's fees the taxing unit received. In a suit filed under this subsection, the purchaser may include a claim for, and is entitled to recover, any excess proceeds of the sale that remain on deposit in the registry of the court or, in the alternative, is entitled to have judgment against any party to whom the excess proceeds have been distributed. A purchaser who files a suit authorized by this subsection waives all rights of subrogation otherwise provided by this section. This subsection applies only to an original purchaser at a tax sale or resale and only if that purchaser has not subsequently sold the property to another person.

(e) If the purchaser prevails in a suit filed under Subsection (d), the court shall expressly provide in its final judgment that:

(1) the tax sale is vacated and set aside; and

(2) any lien on the property extinguished by the tax sale is reinstated on the property effective as of the date on which the lien originally attached to the property.

(f) A suit filed against the taxing units under Subsection (d) may not be maintained unless the action is instituted before the first anniversary of the date of sale or resale. In this subsection:

(1) "Date of sale" means the first Tuesday of the month on which the sheriff or constable conducted the sale of the property under Section 34.01.

(2) "Date of resale" means the date on which the grantor's acknowledgment was taken or, in the case of multiple grantors, the latest date of acknowledgment by the grantors as shown in the deed.

Amended by 1999 Tex. Laws, p. 5109, ch. 1481, Sec. 31; amended by 2001 Tex. Laws, p. 4829, ch. 1430, Sec. 30.

Sec. 34.08. Challenge to Validity of Tax Sale.

(a) A person may not commence an action that challenges the validity of a tax sale under this chapter unless the person:

(1) deposits into the registry of the court an amount equal to the amount of the delinquent taxes, penalties, and interest specified in the judgment of foreclosure obtained against the property plus all costs of the tax sale; or

(2) files an affidavit of inability to pay under Rule 145, Texas Rules of Civil Procedure.

(b) A person may not commence an action challenging the validity of a tax sale after the time set forth in Section 33.54(a)(1) or (2), as applicable to the property, against a subsequent purchaser for value who acquired the property in reliance on the tax sale. The purchaser may conclusively presume that the tax sale was valid and shall have full title to the property free and clear of the right, title, and interest of any person that arose before the tax sale, subject only to recorded restrictive covenants and valid easements of record set forth in Section 34.01(n) and subject to applicable rights of redemption.

(c) If a person is not barred from bringing an action challenging the validity of a tax sale under Subsection (b) or any other provision of this title or applicable law, the person must bring an action no later than two years after the cause of action accrues to recover real property claimed by another who:

(1) pays applicable taxes on the real property before overdue; and

(2) claims the property under a registered deed executed pursuant to Section 34.01.

(d) Subsection (c) does not apply to a claim based on a forged deed.

Added by 1997 Tex. Laws, p. 4301, ch. 1136, Sec. 4; and by p. 4595, ch. 1192, Sec. 3; amended by 1999 Tex. Laws, p. 5109, ch. 1481, Sec. 32.

[Sections 34.09 to 34.20 reserved for expansion]