A Certificate of Redemption given to the original mortgagor or lienee is exempt from tax under Minnesota Statutes Minnesota Statutes287.22, subdivision12. This exemption applies if the property is conveyed during the redemption period and redeemed by the new owner.
January 15, 2016
Foreclosure Sale – highest bidder is mortgagee. The real property is sold for the debt amount of $ 100,000.
March 10, 2016
Original mortgagor conveys the real property to his brother Paul for
$ 10,000. Minnesota deed tax is paid on the $ 10,000.
April 10, 2016
Paul redeems as mortgagor paying sheriff’s pay off amount.
Deed Tax is due on the execution of a certificate of redemption to a creditor as part of a mortgage foreclosure proceeding.
The certificate of redemption given to a creditor functions as a deed and conveys legal ownership of real property. The basis for Deed Tax is the redemption fee set by law and paid by the creditor under Minnesota Statutes 580.
Exemption: Redemption from oneself
A certificate of redemption is exempt from the Deed Tax when the party holding the sheriff’s certificate of sale is the same party who is next in line to redeem the property. View the law, Minnesota Statutes 580.24.
In this situation, the mortgagee usually holds two defaulted mortgages on the same parcel of real property. Legally, the junior creditor must redeem from the senior creditor who redeemed next prior in time in order to preserve any rights under a junior lien. This is necessary even if the junior creditor is also the senior creditor.
Because they already hold legal ownership with the sheriff’s certificate of sale, the holders of successive liens do not have to pay money to themselves. Instead, they may merely place on file the necessary documents that prove that they are entitled to redeem. The paper protection is not a conveyance of legal ownership of the property and, therefore, is not subject to the Deed Tax.