Is it worth buying utility links with sales tax?
Arrears other than property taxes can be sold at a tax sale. This includes unpaid utility bills, sewer, water or garbage, or any special appraisals. Basically any unpaid invoice that is payable to the local government (township, township, county or fiscal district) and is not paid can be sold in the tax sale as a tax bond. 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 subsequent utility charges (and even subsequent taxes) if the property owner does not pay them on time.
Many states give you the opportunity to pay subsequent taxes and charge the default or maximum interest on your subscriptions. The exception to this is Florida – Florida counties do not allow you to pay subsequent taxes and will sell the link each year at the tax sale. So that you don’t have such an opportunity there, you just have to try to buy the link every year.
Utility links can be a good investment for a couple of reasons. First, the delinquent amounts on these links are typically less than tax, so you need less money to buy a utility link than to buy a tax link. And because these ties are smaller, institutional investors rarely bid on them, making them slightly less competitive than larger fiscal ties. Second, when you have a utility lien, you can pay subsequent taxes as well as subsequent sewer charges if the landlord does not pay them. I have had a few links that I originally purchased as small sewer links, and then when the property owner stopped paying taxes, I was able to pay the overdue taxes and sewer amounts. This added thousands of dollars to my original link. Since it was a New Jersey tax lien, I was able to get 18% of all my subsequent tax payments!
Buying utility links is one of the strategies I use to keep my fiscal link portfolio in the double digits!