Alabama Tax Deed- occupied property

17 Replies

I recently obtained possession of a property that is currently occupied. The owner reached out to me saying that he wants to keep his house. However, he hadn’t paid the taxes since 2011. 

1. What can I do? I would like collect monthly rent from him. I sent him a certified letter on yesterday advising the same. Should I go ahead and file an ejectment lawsuit?

2.  If he chooses to redeem, would he pay the money directly to the county and they mail me the payment or will he pay the money directly to me?

Niki,

You say you have possession of the property. Do you also have the deed? If not how long before you get that? If only another year and you don't have a huge amount of money tied up then I would not rock the boat. If a year I would consider just waiting. This night increase your chances the person won't redeem and you will own the property completely.

I he won't pay rent then you will likely need to file the ejectment. Not sure how much it cost in AL, but it's only $80 in SC.

I doubt the county is in the business of collecting rent so he will need to pay you. I have my tenants deposit it in my bank account so that I am not chasing rent or listening to stories of how they mailed it on time.

@Niki Brown , if the taxes are unpaid since 2011, then you have a tax deed. As such you do not have to give the written notice to vacate and then wait 6 months before filing the ejectment lawsuit, you can file immediately. I would give the current occupant 10 business days to sign a lease with you and, if he does not, file the ejectment lawsuit. It will cost you a court filing fee around $300 and attorneys fees of around $500 if you are able to take a default judgment. 

If he redeems, he does that directly through you, and pays you.

@Denise Evans thank you! In the certified letter that I sent him on Monday, I told him that he can continue to live in the home on a month to month basis but beginning January 1st he must have a current signed lease or vacate the home. But, starting next month (September 1st), he must send rent payment directly to me (I can send you the letter if you like).

What's confusing is this, I bought the house with a "Best Price Quote" so I didn't pay the full amount which was roughly $8,900. So, if the client chooses to redeem, he will have to pay me the $8,900, which is the original amount of the back due taxes, right?

@Niki Brown , unfortunately, the redemption price tag is the amount you paid on the best price offer, plus some additional interest. Under former law, the redemption price tag was the full taxes plus interest amount, but that law was ruled unconstitutional for technical reasons. It would have been very easy to fix it, but nobody ever introduced legislation to do that. It is on my "wish list" to get done in the 2019 legislative session. I just need to write something up and get it introduced and passed. It is not fair that someone should fail to pay their taxes for years and then get an opportunity to pay them off really cheaply because you bought it on a best price offer. 

@Denise Evans Oh no! :(

That just made me sick to my stomach. I could've sworn I read a post saying that the original owner would have to pay the original amount that was backed up and not the amount that the investor paid. I'm gong to see if I can find that exert and send it you. Either way, this was definitely a learning experience.

@Denise Evans I just reached out to Shelley Tice in Montgomery. She told me that she's not an attorney but she have been told that this process is a negotiation between me and the original owner. I will keep you updated on what I find out.

She is right. It is a negotiation. Be careful, though. Sometimes (as an example) you will say, "I will deed the property back to you for $5,000" and the taxpayer will say, "I'm not going to pay you $5,000, I happen to know I can redeem for what you paid the state plus a little extra interest."  If you insist on getting your $5,000 when you aren't entitled to it under the law, and the taxpayer has made an issue of this, then you could be sued for refusing to let them redeem for the legal amount.  But, if they are willing to pay you $5,000 for a deed to the property, and nobody has mentioned redemption, then it's probably okay. It's a tricky situation. All I'm saying is, be careful.

@Niki Brown , let me clarify. Redemption is a process "negotiated" beween taxpayer and current owner of the tax deed. But, it's not a true negotiation in that either party can say whatever dollar amount they want, and then they have to wheel and deal and come to an agreement.  It just means that they deal directly with each other, and not through the county. There is a statute that says how much the redemption amount is, even after a tax deed has issued.  So, that is a calculated amount based on what you paid the state, plus additional interest, assuming there have been no improvements.  On the other hand, technically those judicial redemption rights must be exercised in a lawsuit for force the issue. So, if the parties negotiate with each other, it is always an element of negotiations to say to the other party something along the lines of, "You might be right in what you are claiming that you owe me only $XX, but you will have to hire a lawyer to find out, so save the legal fees and pay me $XX plus $YY, and it will still be cheaper than paying the lawyers."  I have settled litigation myself, and my clients (when I was a litigator in Texas) have settled lawsuits by writing checks for things when they weren't liable, but it was cheaper than paying the lawyers to fight about it. That's just real world.

@Denise Evans  Hi Denise.  I have just received a tax deed on yesterday for a property in Jefferson County, Bessemer, AL.  I am in the process of sending a certified letter to the previous owner, who still has possession of the property(is living there), asking them to vacate the property.  I am willing to sell the house back to them.  Can I sell it back to them at a fair market value or can I only sell it to them for the taxes I've paid plus interest?  Also, please verify that these are the correct steps for me to take:

1.  Send a certified letter letting the previous owner know that I have purchased the property via a tax deed and ask them to vacate.

2.  If they don't vacate by the specified date(I'm giving them 2 months), start the ejectment process.

3.  Alternatively, I will rent to them if they want to stay.

Thank you!

@Mona Lisa Zinnerman , If they want to redeem for only taxes plus interest, you have to let them. Offering to sell the property back to them at a higher price is borderline fraudulent. I know people who do that. I'm not sure it if would qualify as legal fraud or not. I, personally, would not want to do that.  Otherwise, your steps are good.

@Denise Evans I have another question.  As I stated before, I already have the tax deed.  If the title is clear, what would prevent me from being able to sale the property or take equity out?  Would I need to obtain any other documents?  Go through any other processes?  I sincerely appreciate you taking the time to answer my questions.  You have been a tremendous  help!!!  

@Mona Lisa Zinnerman , What do you mean, "the title is clear?"  Do you mean you've obtained quitclaim deeds or releases of redemption rights from all possible redeeming parties?  If so, then the title is clear, absent any local government liens.

If you mean you've obtained a Quiet Title order and it is final and non-appealable (42 days after the order is entered) then the title is clear.

If you mean you can't find anybody who is still alive, the title is not clear.  No title insurance company will write a policy. No commercial lender and virtually no private lenders will loan you money, because of the absence of title insurance. You can sell it, but your buyer will not be able to obtain title insurance. You should not give a warranty deed. That is not because it's not allowed, it's because it is VERY foolish. If a title insurance company will not insure title, why should you do it, through the mechanism of a warranty deed?