Warning About Improperly Written Alabama Deeds

8 Replies

Thanks to my friend, Alabama tax sales attorney Greg Stanley, who alerted me to this issue. He and his colleagues are seeing a number of improperly written deeds prepared by non-lawyers, that are causing major headaches and financial losses. Please pay attention to the following issues:

  • If all the deed language is on one page, and only the signature line and notary attestation is on the last page, then it makes it easy for someone to substitute pages after the fact and change important language on earlier pages. If you are not using an attorney to close a deal, require that every single page be signed by the grantor. Not just initials, which are easy to forge, but a full signature somewhere at the bottom of every page.
  • If there are large blank spaces in a deed, cross through them with a giant "X" and sign your name there, as well as on the signature page. That way, new material cannot be added later.
  • A quitclaim deed that contains certain magic words such as "fee simple" buried down at the bottom in stuff you consider boilerplate, or other legalese you don't think is important, might transform your quitclaim deed into a full warranty deed. You can then be sued if the title is not perfect. Was that what you intended when you signed something that said "Quitclaim Deed" at the top? Of course not. We don't go to three years of law school just to buy an extra three years before we have to start paying off student loans. There are tens of thousands of technicalities that make differences in things.
  • If you are selling tax sale properties, MAKE SURE you disclose in writing that the property might be subject to redemption rights, and make any buyer sign that disclosure in full, not just initials.
  • If you are buying tax sale properties, even tax deeds, MAKE SURE you calculate the redemption price tag without any additions for improvements. See if you are okay with the risk involved in paying a seller's price that could be more than the redemption amount, and taking the risk you could lose the difference between those two numbers. We all take risks, otherwise we'd invest in Treasuries, not real estate. But make a calculated decision about how much risk you are taking, instead of doing it blindly.
  • If someone tells you that you can pay more than the redemption price for tax deed or tax certificate properties in Alabama because you can immediately take possession, make preservation improvements, and make it too expensive for the owner to redeem, they are TECHNICALLY telling you the right thing. The "rest of the story" as Paul Harvey used to say, is that you must first take "peaceable possession." That can be done in only three ways. (1) The person who lost it at the tax sale (or all of their heirs) tell you they have no intention of ever redeeming and the property is abandoned. Property that has been vacant and neglected, even for a long time, is not legally abandoned. Legal abandonment depends on the owner's intentions, not what things look like on the ground. (2) The person who lost it at the tax sale surrenders possession to you, preferably in writing so they can't change their mind and lie about it later. (3) You have an ejectment order from a judge. Without those things, a tax assessed owner can claim you were not in peaceable possession, you are not entitled to be paid for any improvements at all, and by the way you should have to pay them actual and punitive damages. Courts are doing this, and not just an isolated few!

There is a lot of money to be made in Alabama tax sale investing. But, you have to know what you are doing and be skeptical of things that seem too good to be true. Do your research. Ask questions here in Bigger Pockets. I usually get notification of things that contain the words Alabama and tax sale, and make an effort to respond as quickly as possible. Other members are good about responding. You are a member of this community for a reason. Take advantage of it!

A note about abandonment. 

Getting the owner of real property express his/her intent to "abandon" their property is certainly the preferred result, but express abandonment may not be required.   An owner's intent to abandon real property can be implicit (or implied from the known facts).  I mention this only because some readers could believe otherwise from this section of the original post.

(1) The person who lost it at the tax sale (or all of their heirs) tell you they have no intention of ever redeeming and the property is abandoned. Property that has been vacant and neglected, even for a long time, is not legally abandoned. Legal abandonment depends on the owner's intentions, not what things look like on the ground.

In addition to express abandonment (a verbal or written statement of the owner's intent to abandon), the law also recognizes that an owner's intent to abandon real property can be implicit (or implied from the known facts).  Implicit abandonment is a rarely used legal doctrine.  In some States there is no precedent. For that reason and others, Judges may disfavor or avoid finding that a property has been implicitly abandoned.  Which means the burden of proof can be high.  

In fact the entire topic of the abandonment of real estate is rarely litigated and the common law and statutes regarding abandoned RE can be at odds with each other.  (See; "The Right to Abandon" Univ of Penn Law School) https://www.law.upenn.edu/live/files/63-strahilevitz158upalrev3552010pdf

Still, implicit abandonment of real estate can be just as valid as express abandonment.  The question of whether property is implicitly abandoned is based on what a reasonably prudent person would conclude from the known facts.  Facts which can support a claim of implicit abandonment include the fact that, the owner can not be found for an extended period of time (years), the owner does not respond to communications to last known mail, phone, text, email addresses; the fact that no maintenance is being done to preserve the property, no one is paying the property taxes, etc.  When one can establish facts sufficient to convince a reasonably prudent person that the owner of record has abandoned his/her property, then courts can and do find that the owner has implicitly abandoned the property.

Abandonment of real estate, either expressly or implicitly, is also a valid defense against a charge of trespass.  A person who abandon's real property can not later claim they were trespassed against.  This is similar to a person who puts an item out on the street.   If it has a sign that says "Free" then that item has been expressly abandoned.  If the item has no sign but is out with the household garbage, then the owner has implicitly abandoned the item.  In either case, that person can not subsequently claim their property has been stolen, when another person comes along and picks it up.  Real Property can be implicitly abandoned as well.

Smart landlords use Azibo
One-stop-shop for landlords
Rent collection, banking, bill pay & access to competitive loans and insurance - free for landlords
Get started for free

@Davido Davido, that is an excellent and well reasoned analysis of the law of abandonment as generally understood in law schools and many jurisdictions in the United States. I do not mean that as a put-down. The pure study of the law is very attractive to me but there are too few legal scholars these days. 

Unfortunately, in Alabama, the law is very clear that abandonment of real property requires an intention and an action. Alabama does not recognize implicit abandonment. We do not recognize implicit abandonment. For investors in Alabama, please remember the simple rule I wrote about.  That being said, if you've done everything you can possibly do to find the owner with no results, and if the property is vacant and neglected, then don't be afraid to proceed carefully and in measured stages to take DIY possession.   After all, you won't be able to serve ejectment lawsuit papers on anyone because you can't find anyone.

I’m watching this situation play out next door. Someone came and cleared the yard recently as it was overgrown. He told us he purchased the property via tax sale from state of Alabama. Turns out the taxes haven’t been paid 16-18.  One brother was working on cleaning up the property last summer and stated they were going to flip and sale. Turns out he didn’t know the other brother hadn’t paid the taxes. The property is in the deceased mother’s name and tax notice goes to the other brother. I advised our neighbors about the person having a tax lien and they were surprised. I believe they are trying to see what can be done to redeem their property back.  I’m not sure whose name was called at auction, if that may be a possible loophole. (I’ve been reading a lot online about this.) But, I advised them we are interested in purchasing the property from them if the do redeem it as we own property on either side. Now, we wait. 

Second, an aunt and uncle with no children are in the nursing home. Taxes were not paid this past year, it went to sale and it shows state of Alabama as the bidder. I’m pretty sure Medicaid has a lien on it. It has an old dilapidated trailer on it. I would like to purchase tax lien from state. Do I have to wait until next year or can I call the State directly? It isn’t showing for sale on the state site yet. We would rent it out or whatever. The uncle passed and she will never return home. I don’t foresee any family claiming it.  How should I go about getting this property?  

@Karen Kilgore, If the aunt and uncle property is in Jefferson or Mobile county, it will show up on the state inventory list any day now.  You buy it by requesting a price quote online. It is first come, first served, so monitor this several times a day.

Instead of getting the tax certificate, you can probably buy it from the owners as a short sale, usually for something slightly less than the tax appraised value.  It is handled like a short sale. Medicaid will release their lien in exchange for getting all the net proceeds at closing. If you want the owners to receive a little bit of money out of the deal, you can buy their personal property for up to $2,000. They are not allowed to have more than that under Medicaid regulations.

Thanks so much for your input! Ok, so my aunt is incompetent has dementia. I can offer the POA $1500-2000 and process the purchase and they pay the tax lien and give Medicaid the rest with copies of the sale, etc., and Medicaid will release it? Land value is around 18,000 to 20,000.

Who has the power of attorney? Is that you?  To avoid later claims of improprieties, you need to pay the tax assessed value or the appraised value, if you want to get an appraisal.  Medicaid will release their lien in exchange for the net proceeds at closing. The $1,500 to $2,000 for personal property is just to help sweeten the deal if you need to do that. For your aunt, you can probably make your offer $1,500 to $2,000 less than the tax appraised value and Medicaid will still approve it, and then pay the $1,500 to $2,000 to your Aunt's account to she has money to get her hair done and have a phone in her room and buy some nice pajamas, robe, etc.