Enforcing Insurance and Tax Payments

Non-payment of taxes and insurance put your interest in the property at risk. Taxes are not as time-critical as insurance because the State of New Mexico does not threaten foreclosure until they’ve gone unpaid for three years. If your buyer doesn’t pay an installment when it’s due, you have time to work with her/him.

Insurance is an entirely different matter. The first problem is that once the policy expires, the property is instantly unprotected. There is no grace period, so if the property burns down one minute after expiration, you will lose your investment. It is critical that you don’t let the policy expire. The second problem is that many insurance companies only give you (the mortgagee) a few days notice that the policy is going to expire. Therefore, you have to be prepared to pay the premium quickly in the event that you get a cancellation notice. Never let insurance expire!

If you find that property tax bills or insurance premiums have not been paid, most New Mexico Real Estate Contracts give you the right to pay those charges to protect your interest in the property. If you pay, you have to look at your contract to see what action it allows you to take in enforcing repayment of taxes or insurance. A few contracts state that the amount you pay is added to the current balance of the contract. Most contracts state that the amount you pay on behalf of the buyer is “immediately due and payable” and also bears interest at the same rate that is charged on the principal balance. Usually, the fact that those charges are not paid do not constitute a default by the purchaser. Rather, once you have paid the past due amount, you can demand repayment from the purchaser. The buyer must then repay you or risk repossession according to the default provisions of your contract. You must follow the provisions of the contract that relate to a default by the purchaser. Look for a paragraph in your contract with a heading similar to “Seller’s Rights if Purchaser Defaults” for details on handling defaults, or call your attorney.

There are other articles in this section of the website that discuss the different types of Real Estate Contracts commonly used in New Mexico.

This publication is intended to provide accurate and authoritative information. It is published with the understanding that the publisher and/or author are not engaged in rendering legal services to readers. If legal or other expert assistance in required the services of a real estate attorney or other professional should be obtained.