Colorado
How It Works
Colorado counties sell tax liens on delinquent properties to investors. If a lien is not paid, then after three years, the lienholder is entitled to take full title to the property upon application for a treasurer’s deed. The lienholder may then keep the property or sell it and retain any profits.
The Impact
Homeowners caught up in this process lose, on average, 97% of their equity. For the 260 homes in our dataset, homeowners lost a total of $52 million.
Why It Matters
In Colorado:
- 98% of homes were forcibly seized for tax debts less than the price of a 10-year-old Ford F-150.
- On average, homeowners lost their homes and all the savings in them for debts worth 3% of the value of the home.
- Investors were able to keep $41 million more than what was owed to them.
In a peaceful hilltop lot in Adams County, Colorado, the Martinez family lived in a mobile home they had owned since 2011. Raquel Martinez and her husband had bought the property for $6,000 for themselves and their teenage sons. Since then, they had made several renovations and refurbishments to make the place their home: a new roof, wood paneling, windows, paint, and tile floors.1
But one day in 2016, out of the blue, Raquel discovered a letter on their door. The letter informed the family that they no longer owned the home they were living in because they had failed to pay property taxes. The Martinez family had two options: pay $12,020 to buy their home back or vacate the property within three days.2
Raquel and her husband thought the letter must be a scam, so they ignored it. But as it turned out, it was not a scam—at least not one without backing from state law and local government.
Here’s what happened: Adams County had placed a tax lien on the Martinez family’s mobile home for approximately $350 in unpaid property taxes. An investor purchased the lien, took ownership, and sold the home to another investor. The Martinez family knew none of this.
To avoid getting kicked out of their home with their children, Raquel and her husband borrowed money from friends and relatives to repurchase their mobile home for $11,000—slightly less than the initial $12,020 the new owner had asked for, but almost twice the price they had paid to buy their home in 2011.
In many cases, mobile homeowners like the Martinez family are not evading their property taxes on purpose. Rather, they don’t understand how the tax system works. Compounding this problem, mobile homes often change hands informally, and the new owners never register the titles in their own names. Counties unknowingly send delinquent tax notices to former owners, who may ignore them or never receive them. Current owners can end up losing their homes for tax debts they never knew they had.
In Colorado, delinquent property taxes become liens on the property. The county governments then auction off the liens to private investors. If the property owners are not able to pay back the taxes, interest, and fees, the lienholders can apply to the county treasurer for the deeds to the properties.
Real property owners have a three-year redemption period to get their property back before the county will issue a deed, but mobile homeowners only have a year.3 Either way, Coloradoans can end up losing their homes and all equity they’ve built up, even for less than $100 in unpaid taxes.
Since Colorado law allows this home equity theft scheme, the Martinez family’s experience is far from unique. In 2016, there was an uptick of Coloradoans losing their mobile homes due to underpaid property taxes. Investors are especially quick to snatch up the mobile homes because the tax liens on them may be just a few hundred dollars.4
Home equity theft is unconstitutional because the Takings Clause of the U.S. Constitution forbids the government from taking more than it is owed. To prevent Coloradoans from facing financial devastation over honest mistakes, Colorado must end the unfair practice of home equity theft now.
Resources
End Home Equity Theft Model Policy
Statement of Principles on Ending Home Equity Theft
Download data
State Summaries
How misunderstanding tax law costs some Colorado families their mobile homes
Legal Appendix
Colorado Home Equity Theft Laws
Does the law commonly protect owners’ equity?
- Analysis
-
No. In Colorado, tax liens are sold to the highest bidder. Any surplus generated from the sale is credited to the county’s general fund. If the property remains unredeemed three years after the tax lien sale, the lienholder may apply for a treasurer’s deed and obtain full title to the property.
- Citation
-
Colo. Rev. Stat. §§ 39-11-115(1), -120(1), -136.
Are there any exceptions to that rule?
- Analysis
-
No.
- Citation
-
N/A
Does the government sell tax liens, or does it sell property outright, and what procedures does it use for the sale?
- Analysis
-
The government sells tax liens to the highest bidder.
- Citation
-
Colo. Rev. Stat. § 39-11-115.
What interest and penalties accrue for delinquent taxes, and who collects them?
- Analysis
-
Delinquent taxes initially accrue interest at 1% per month. Once a tax lien is sold, the interest rate for redemption is added at nine percentage points above the federal discount rate. All interest payments prior to the tax lien sale are paid to the county treasurer; after the tax lien sale, interest is paid to the lienholder.
- Citation
-
Colo. Rev. Stat. §§ 39-10-104.5(3), 39-12-103(3), -108.
What is the redemption period—the length of time to pay the debt prior to permanently losing title?
- Analysis
-
There is a three-year minimum redemption period during which the lienholder may not apply for a treasurer’s deed. Once this period ends, redemption remains available until the issuance of the treasurer’s deed.
- Citation
-
Colo. Rev. Stat. §§ 39-11-120(1), 39-12-103(3).
Who profits from home equity theft?
- Analysis
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The windfall is split between investors and the government, depending on the relationship between the tax lien purchase price and the market value of the home. The closer the purchase price is to the home value, the more equity the government will keep. When the purchase price is far less than the home value, more equity will be kept by the investor.
- Citation
-
Colo. Rev. Stat. § 39-11-115
How much time does the previous owner have to claim the surplus proceeds, and what are the procedures for claiming them?
- Analysis
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N/A
- Citation
-
N/A
What types of foreclosures are used in the state?
- Analysis
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Administrative.
- Citation
-
Colo. Rev. Stat. § 39-11-120.
What types of notice does the state require?
- Analysis
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(1) Notice of delinquency, (2) three notices of all lands subject to tax lien sale, and (3) notice prior to issuing the deed.
- Citation
-
Colo. Rev. Stat. §§ 39-11-101, -102, -128.
1 Kevin Simpson, “How Misunderstanding Tax Law Costs Some Colorado Families Their Mobile Homes,” DenverPost.com, MediaNews Group, October 8, 2016, https://www.denverpost.com/2016/10/08/tax-liens-mobile-homes-colorado/.
2 Kevin Simpson, “How Misunderstanding Tax Law Costs Some Colorado Families Their Mobile Homes.”
3 Colo. Rev. Stat. Ann. § 39-11-120(1) (West 2022); id. § 39-10-111.5(6)(a)(I).
4 Mitchell Byars, “Single Investor Buys More Than 30 Mobile Home Tax Liens in Boulder County,” DailyCamera.com, MediaNews group, March 4, 2016, https://www.dailycamera.com/2016/03/04/single-investor-buys-more-than-30-mobile-home-tax-liens-in-boulder-county/.