• Louisiana homeowners have three years to redeem their property.Louisiana state contour against blurred USA flag image by Stasys Eidiejus from Fotolia.com
  
  Tax lien certificates are government issued paper that serve two primary purposes. First, it is a debt enforcement mechanism local governments can use to enforce delinquent property taxes. Second, it allows private investors an opportunity to earn moderate to high rates of return with little risk. Louisiana, like all 50 states, has tax lien certificate laws that regulate how local governments can enforce unpaid property taxes through this process.
  
  

Taxes

• Louisiana has parishes rather than counties. Parishes operate the same way counties do in other states. They are basically political subdivisions of the state government. Parishes impose property taxes on homeowners to help fund local services like law enforcement, schools and libraries. Louisiana homeowners must pay their property taxes by December 31 of each year. If they fail to pay, then the local tax collector will declare the properties delinquent. Delinquent properties are subject to auction. Investors may bid on tax certificates, which act as a lien on the property and a security for the bidder.
  
  

Sale

• Most parishes hold tax certificate sales annually on the last Wednesday of May. In addition, local parish officials will advertise the properties and the auction in local newspapers prior to the sale. The sale provides an avenue for the local parish to collect its unpaid tax debt from a third party. The auction is not actually for the property itself. Instead, it is to purchase the tax rights as an investment. Investors who purchase tax lien certificates do not own the property. They have a lien on the property but no title. Investors cannot legally enter or seize the property. Purchasing a lien, however, is basically like purchasing the possibility that if certain events occur and procedures are followed, the investor may one day take title to the property. In the meantime, the investor typically earns a healthy return on the tax lien certificate.
  
  

Redemption

• Once an investor purchases a tax lien certificate, the original property owner has a three years, under Louisiana law, to redeem the property. Redemption means the homeowner must pay all outstanding back taxes plus interest, penalties and reasonable costs for the auction, including advertisement costs. In Louisiana, the interest rate for tax lien certificates is 17 percent, which includes 12 percent plus a 5 percent penalty. If the original property owner does not redeem the property within the three years, then the tax lien certificate holder can move to enforce its lien. This process may include attempting to judicially foreclose on the property and sell it at another auction to recover its return on the tax lien certificate.