Alabama Tax Sales and Investors Who Wait Too Long

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A new Alabama Court of Civil Appeals decision on Friday January 12, 2018 makes it clear that Alabama tax sale investors who wait too long to take possession forfeit their rights.

The issue is about the short statute of limitations. It says that actions to recover real estate must be filed within 3 years of the tax deed date or forfeited.  Everybody pretty much knows that applies in favor of investors and against taxpayers if the tax sale was void for some reason. If the investor is in possession for three years after the tax deed date, and the taxpayer fails to file suit to void out the tax sale, then the investor has "cured" the sale and has good title.

That statute cuts both ways, though. It rarely reaches the appellate courts for cases in favor of taxpayers, but another one just did, this month.

The taxpayer owned a condo, and remained in possession the entire time after failing to pay his taxes. The investor never took possession, and never filed an ejectment lawsuit.  There was a significant overbid. More than six years after the auction, the investor filed an ejectment lawsuit. The Alabama Court of Civil Appeals said the investor waited too long. Because of the short statute of limitations, the investor was barred from prosecuting its ejectment lawsuit, and title vested back into the taxpayer and could be quieted!

So, what happens to the overbid? The recent amendments say it belongs to the redeeming party. But, if redemption is irrelevant, then we must rely on the Alabama Supreme Court decision that says it belongs to the current owner of the property!  In other words, the taxpayer can now claim the overbid!

Read the complete decision here:

Great information Denise. According to this information does a "cured" sale mean a quite title action is not needed?

@Gene Walker , "curing" a void tax sale is kind of like regular adverse possession. It's okay until somebody makes an issue about it and you have to go to court to get a judge to say the other person has no rights in the property.  Most title companies will not write title insurance after a tax sale unless you have a quiet title order.  If you file a quiet title lawsuit against the taxpayer 3.5 years after the tax deed, you will win if the taxpayer counterclaims and alleges the tax sale was void if:

  1. You can prove you were in exclusive possession of the property during the most recent three years after the tax deed date; and
  2. Any evidence by the taxpayer that it was ALSO in intermittent possession of the property does not rise to the legal standard of scrambling possession.

It's a little bit complicated to explain all the examples of #2. The safest way to win is to have renovated a house and rented it out to tenants or lived in it yourself for the entire time period.  Of course, that's not the only way, I'm just giving you an example of the best way in a perfect universe.

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