I purchased a tax certificate from Alabama a few years ago and I now have the tax deed dated a month ago. I just picked up the tax deed yesterday and am filing it today.
Someone started bushhogging and surveying two parcels beside each other a couple of days ago (one of them being the one I have the tax deed for). After being surprised by that activity I looked into the records for properties around my parcel and found that years ago a developer had originally bought the two parcels in one sale. For whatever reason the developer paid the taxes on one of the parcels but didn't pay taxes on the other so it went to tax sale. My guess is after they bought the parcels they only had one of them assessed in their name, but I'm new to this and am not sure.
I haven't spoken with the developer yet. I didn't even realize they had originally purchased the parcel I have the tax deed to until the heavy equipment showed up which made me look closer at deeds for sales in the area and discovered my parcel listed on the other property's deed.
This is my first tax certificate/tax deed so I'm not sure what comes next. I don't want to have an adversarial interaction with the developer or to try and keep the property for myself. All I'm looking for is return on my investment. Any thoughts or advice would be appreciated.
JD, CCIM , Real Estate Broker · Tuscaloosa, AL · Member since 2014 · 1k+ posts · 1k+ votes
1y
I'm the woman who is the expert. The owner still has redemption rights for a period of three years after the tax deed date.
If you bought the certificate from the state for the full amount quoted to you, you must contact the state and get the calculations of how they arrived at that number. The reason is, you must continue the interest clock on each year's taxes to up to the present, at whatever the interest rate was at the time of the auction. Pre-2020 it was 12% per year. After that it was 8% per year. You can't just take what you paid and start charging interest on that figure, because part of what you paid was already accrued interest. You are not allowed to compound interest.
If you bought the certificate from the state on a best price offer, you charge interest on your purchase price, not on the full amount of the taxes that were due, but were not paid by you when you purchased.
After you obtained your tax deed, you are entitled to something called "mesne profits" if you file an ejectment lawsuit against the former owner and they redeem during that lawsuit. If you talk to a lawyer about the concept, some of them pronounce it "main profits" and some say "mez-knee profits." Either is correct. I'm telling you this so you don't get confused when talking to different lawyers.
Mesne profits is a measure of damages for the unauthorized use of real property. It is the reasonable rental value of the property from the date of your deed until the date of redemption. Because it is raw land, it won't be much money in your situation.
My advice is to contact the developer, show him/her this post, and come to an agreement for a redemption. Redemption is accomplished by paying you money, and you sign a Redemption Quitclaim Deed. That is the same thing as any plain vanilla Quitclaim Deed except it has the word Redemption in the title. Tell the developer to pay someone to prepare the deed. It seems simple, but it's not a DIY thing because of technical rules that are different depending on circumstances.
Or, you can pay a lawyer to file an ejectment lawsuit, the developer can pay a lawyer to defend the lawsuit and redeem, and the developer will also be responsible for reimbursing your legal fees, plus interest. At the end of the day, you won't make a pile of money, it will cost the developer more money than if they were just reasonable, and only the lawyers will be happy.
The solution is to work it out, with the developer paying you more than the redemption price tag, but less than the legal fees it would incur to fight about it. For your part, it might seem like a free roll of the dice to go to court, but there are surprises and landmines along the way, litigation always takes far longer than anybody expects, and the time and emotional expense of fooling with litigation are energy drains on more productive endeavors. I speak from experience as a former defensive litigation attorney. Work it out peacefully!
Specialist · Greenville, NC · Member since 2019 · 673 posts · 408 votes
1y
Step 1: RECORD IT
Step 2: Contact the developer to inform him that you own the parcel. Have proof on hand (easy enough to find) online of the missed tax payments and any documentation that supports that he specifically didn't pay his taxes.
Probably a simply mistake on his part, but now if he wants to develop on it, he either has to land lease it from you or buy it back.
I'm not sure how the whole tax deed thing works, so that would be something you have to figure out between the two of you. They don't do those in North Carolina
They have a redemption period. If they fail to pay the taxes, plus fees and interest, within that time, then the property legally becomes yours. Any development work they've done on the property also becomes your property.
If the property becomes yours, you could try to sell it back to them quickly and below market for a nice profit.
I purchased a tax certificate from Alabama a few years ago and I now have the tax deed dated a month ago. I just picked up the tax deed yesterday and am filing it today.
Someone started bushhogging and surveying two parcels beside each other a couple of days ago (one of them being the one I have the tax deed for). After being surprised by that activity I looked into the records for properties around my parcel and found that years ago a developer had originally bought the two parcels in one sale. For whatever reason the developer paid the taxes on one of the parcels but didn't pay taxes on the other so it went to tax sale. My guess is after they bought the parcels they only had one of them assessed in their name, but I'm new to this and am not sure.
I haven't spoken with the developer yet. I didn't even realize they had originally purchased the parcel I have the tax deed to until the heavy equipment showed up which made me look closer at deeds for sales in the area and discovered my parcel listed on the other property's deed.
This is my first tax certificate/tax deed so I'm not sure what comes next. I don't want to have an adversarial interaction with the developer or to try and keep the property for myself. All I'm looking for is return on my investment. Any thoughts or advice would be appreciated.
There is a woman on here under tax liens and notes who is an expert in alabama. look her up and get her 2 cents.
JD, CCIM , Real Estate Broker · Tuscaloosa, AL · Member since 2014 · 1k+ posts · 1k+ votes
1y
I'm the woman who is the expert. The owner still has redemption rights for a period of three years after the tax deed date.
If you bought the certificate from the state for the full amount quoted to you, you must contact the state and get the calculations of how they arrived at that number. The reason is, you must continue the interest clock on each year's taxes to up to the present, at whatever the interest rate was at the time of the auction. Pre-2020 it was 12% per year. After that it was 8% per year. You can't just take what you paid and start charging interest on that figure, because part of what you paid was already accrued interest. You are not allowed to compound interest.
If you bought the certificate from the state on a best price offer, you charge interest on your purchase price, not on the full amount of the taxes that were due, but were not paid by you when you purchased.
After you obtained your tax deed, you are entitled to something called "mesne profits" if you file an ejectment lawsuit against the former owner and they redeem during that lawsuit. If you talk to a lawyer about the concept, some of them pronounce it "main profits" and some say "mez-knee profits." Either is correct. I'm telling you this so you don't get confused when talking to different lawyers.
Mesne profits is a measure of damages for the unauthorized use of real property. It is the reasonable rental value of the property from the date of your deed until the date of redemption. Because it is raw land, it won't be much money in your situation.
My advice is to contact the developer, show him/her this post, and come to an agreement for a redemption. Redemption is accomplished by paying you money, and you sign a Redemption Quitclaim Deed. That is the same thing as any plain vanilla Quitclaim Deed except it has the word Redemption in the title. Tell the developer to pay someone to prepare the deed. It seems simple, but it's not a DIY thing because of technical rules that are different depending on circumstances.
Or, you can pay a lawyer to file an ejectment lawsuit, the developer can pay a lawyer to defend the lawsuit and redeem, and the developer will also be responsible for reimbursing your legal fees, plus interest. At the end of the day, you won't make a pile of money, it will cost the developer more money than if they were just reasonable, and only the lawyers will be happy.
The solution is to work it out, with the developer paying you more than the redemption price tag, but less than the legal fees it would incur to fight about it. For your part, it might seem like a free roll of the dice to go to court, but there are surprises and landmines along the way, litigation always takes far longer than anybody expects, and the time and emotional expense of fooling with litigation are energy drains on more productive endeavors. I speak from experience as a former defensive litigation attorney. Work it out peacefully!
JD, CCIM , Real Estate Broker · Tuscaloosa, AL · Member since 2014 · 1k+ posts · 1k+ votes
1y
Do NOT sit by and let him build and then hit him up for a "better price." It is the reasonable rental value without the new improvements, because the tax sale investor did nothing to add value regarding the improvements. Under Alabama law, that is a VERY dangerous play and you could end by losing money.
You also cannot sit back and let him build the house and say "Thanks." Under any scenario, any state, someone who sits on their rights and lets someone get into the weeds to the benefit of the person who sat on their rights, will NOT have those "rights" enforced by the courts. That is under almost 1,000-year old principals of "equity" followed in English and then American jurisprudence. Think Norman Invasion, 1066. (Which is why "mesne" often has the French pronunciation "main.") Think King Henry II, the great lawgiver of England, who took the throne in 1154. That old.
The developer absolutely has the right to redeem. You have NO leverage, no matter what he builds or does not build, except for the developer saving some money in legal fees and cutting down on mesne profits damages. And, if it comes out that you stood by and let the clock run on mesne profits just to set up the former owner for large damages, a judge will not give them to you. The judge might also find that "reasonable legal fees" is a number much smaller than what you had to pay your lawyer. Those are also principles of equity. Believe me, things ALWAYS come out, no matter how well litigants think they've hidden them. Again, I speak from experience.
Investor · Orlando, FL · Member since 2013 · 837 posts · 316 votes
1y
@Brandon Robertson Interesting situation. Have you pulled title on the property? It would be good to also have that in hand to know where your legally stand.
Do NOT sit by and let him build and then hit him up for a "better price." It is the reasonable rental value without the new improvements, because the tax sale investor did nothing to add value regarding the improvements. Under Alabama law, that is a VERY dangerous play and you could end by losing money.
You also cannot sit back and let him build the house and say "Thanks." Under any scenario, any state, someone who sits on their rights and lets someone get into the weeds to the benefit of the person who sat on their rights, will NOT have those "rights" enforced by the courts. That is under almost 1,000-year old principals of "equity" followed in English and then American jurisprudence. Think Norman Invasion, 1066. (Which is why "mesne" often has the French pronunciation "main.") Think King Henry II, the great lawgiver of England, who took the throne in 1154. That old.
The developer absolutely has the right to redeem. You have NO leverage, no matter what he builds or does not build, except for the developer saving some money in legal fees and cutting down on mesne profits damages. And, if it comes out that you stood by and let the clock run on mesne profits just to set up the former owner for large damages, a judge will not give them to you. The judge might also find that "reasonable legal fees" is a number much smaller than what you had to pay your lawyer. Those are also principles of equity. Believe me, things ALWAYS come out, no matter how well litigants think they've hidden them. Again, I speak from experience.
my limited experince at this is a trier of fact will side with the land owner most all the time. I bought a tax sale prop in CA .. these are tax sales not tax certs. house was built half way onto my lot.. owner of house went to court he only had to pay what half of the lot was worth at the time.. so no big win.. more like a big hassle
Do NOT sit by and let him build and then hit him up for a "better price." It is the reasonable rental value without the new improvements, because the tax sale investor did nothing to add value regarding the improvements. Under Alabama law, that is a VERY dangerous play and you could end by losing money.
You also cannot sit back and let him build the house and say "Thanks." Under any scenario, any state, someone who sits on their rights and lets someone get into the weeds to the benefit of the person who sat on their rights, will NOT have those "rights" enforced by the courts. That is under almost 1,000-year old principals of "equity" followed in English and then American jurisprudence. Think Norman Invasion, 1066. (Which is why "mesne" often has the French pronunciation "main.") Think King Henry II, the great lawgiver of England, who took the throne in 1154. That old.
The developer absolutely has the right to redeem. You have NO leverage, no matter what he builds or does not build, except for the developer saving some money in legal fees and cutting down on mesne profits damages. And, if it comes out that you stood by and let the clock run on mesne profits just to set up the former owner for large damages, a judge will not give them to you. The judge might also find that "reasonable legal fees" is a number much smaller than what you had to pay your lawyer. Those are also principles of equity. Believe me, things ALWAYS come out, no matter how well litigants think they've hidden them. Again, I speak from experience.
Thank you for your responses and experience. Even if it were possible to wait it out and do a "gotcha" at the end, that's just not how I want to treat anyone. I got the deed recorded today and I'm going try to get the numbers from the state and reach out to the developer tomorrow and see what we can work out. I'm happy to share what happens in case anyone is interested.
Do NOT sit by and let him build and then hit him up for a "better price." It is the reasonable rental value without the new improvements, because the tax sale investor did nothing to add value regarding the improvements. Under Alabama law, that is a VERY dangerous play and you could end by losing money.
You also cannot sit back and let him build the house and say "Thanks." Under any scenario, any state, someone who sits on their rights and lets someone get into the weeds to the benefit of the person who sat on their rights, will NOT have those "rights" enforced by the courts. That is under almost 1,000-year old principals of "equity" followed in English and then American jurisprudence. Think Norman Invasion, 1066. (Which is why "mesne" often has the French pronunciation "main.") Think King Henry II, the great lawgiver of England, who took the throne in 1154. That old.
The developer absolutely has the right to redeem. You have NO leverage, no matter what he builds or does not build, except for the developer saving some money in legal fees and cutting down on mesne profits damages. And, if it comes out that you stood by and let the clock run on mesne profits just to set up the former owner for large damages, a judge will not give them to you. The judge might also find that "reasonable legal fees" is a number much smaller than what you had to pay your lawyer. Those are also principles of equity. Believe me, things ALWAYS come out, no matter how well litigants think they've hidden them. Again, I speak from experience.
Thank you for your responses and experience. Even if it were possible to wait it out and do a "gotcha" at the end, that's just not how I want to treat anyone. I got the deed recorded today and I'm going try to get the numbers from the state and reach out to the developer tomorrow and see what we can work out. I'm happy to share what happens in case anyone is interested
Great attitude Brandon. Yes please keep us posted. Thanks Denise for all of your detailed information on Alabama tax liens.
I am remembering a lawyer friend advising her parents on land issues. In most states if someone makes improvements to land that is not theirs, they tend to have some right to the value that they improved the land if not the land itself. Some states they need to believe the land is theirs, in others (such as Maine) they can know that their land isn’t theirs and still have a right. Some states will give the underlying land while others will give the land but expect the newer owner to compensate the old while still others would require the owner to compensate the person who performed the value add. The law varies greatly between states (and harkens back to the pioneer days). Which is to say if you do nothing while he develops, you will likely be gifting the land back to the developer.
I talked to the contractor around 2 1/2 weeks ago. He was surprised and said he needed to talk to his business partner (brother) and call me back. He did. They don't know what happened but he said they're getting their normal closing lawyer to talk to the lawyer who handled that sale and figure things out. I mentioned a price that I feel is very reasonable if they wanted to do the redemption deed. Now I haven't heard anything. I texted last Monday and got crickets. I hope continuing to wait isn't putting me at any disadvantage at this point. They haven't been doing anything on the property. I'll check in if anything new happens.
I talked to the contractor around 2 1/2 weeks ago. He was surprised and said he needed to talk to his business partner (brother) and call me back. He did. They don't know what happened but he said they're getting their normal closing lawyer to talk to the lawyer who handled that sale and figure things out. I mentioned a price that I feel is very reasonable if they wanted to do the redemption deed. Now I haven't heard anything. I texted last Monday and got crickets. I hope continuing to wait isn't putting me at any disadvantage at this point. They haven't been doing anything on the property. I'll check in if anything new happens.
they probably have title insurance and will have the title company handle it and are not going to do any more work until it is resolved.
JD, CCIM , Real Estate Broker · Tuscaloosa, AL · Member since 2014 · 1k+ posts · 1k+ votes
1y
If there is title insurance involved, you should know it is not simply a matter of redeeming during the judicial redemption period (in other words, taxes and interest only). You now OWN the property even though someone might be able to take it away from you because of redemption rights. Think about a home mortgage--you OWN the property, but the bank might be able to take it away from you. Similar concept.
Because you have a tax deed and own the property, you are entitled to damages for "mesne profits," being the reasonable rental value of the property from the date of your deed until redemption. That's probably not much. You are also entitled to damages for the trees cut down and dirt work done on your property. Make sure you get everything you are entitled to.
Well I don't know if they happen to be reading this or if it's just coincidence, but they contacted me last night and we agreed to an amount for a redemption quitclaim deed. Their lawyer will work up the paperwork and I'll be getting a check :)
