All Forum Posts by: Denise Evans

@Justin Mason

1.  If you paid ten years of taxes and interest to acquire it, the former owner must pay you that same amount to redeem, plus any additional taxes and interest accrued after you bought it from the State.

2. If you bought it on a Best Price Offer for $1,000 (as an example) when the total taxes and interest was really $10,000 (for example) then a redeeming former owner has to pay you only $1,000 plus any additional taxes and interest accrued after you bought it from the State.

3.  Warning: There is one Circuit Court decision (trial level court, not an appeals court) in Jefferson County that held Rioprop and the Short Statute of Limitations applies to state-acquired property. As a result, if it has been more than six years from the date of the auction and the State never acquired exclusive and continuous possession of the  property, then the former owner can sue to get the property back and not pay anything at all. I think that decision is wrong. It was never appealed, but it is hanging out there like a scary monster in the night.  The parties settled instead of appealing. In the early and mid-20th century, the state would send people out to take possession of tax sale property on the state inventory, but they no longer do that.  I would not be afraid to buy property that had been on the state inventory for more than six years, but everybody has to evaluate their own tolerance for risk

@Justin Mason, the overbid money is paid to the county. They keep it for ten years. If not redeemed within ten years it is forfeited and they get to keep it.

During  the first three years, owners who redeem do it at the county level. Owners must pay auction bid price, including overbid, plus other years taxes in the meantime, plus interest on the relevant amounts.  Many counties used to make owners pay that whole amount and then apply for a refund of the overbid money, which technically was the property of the owner. Then there were a series of class action lawsuits against counties, and they were forced to simply give redeeming owners a credit for the overbid money.  Then, the county put the money paid by the redeeming owner together with the overbid money it already had and wrote one check to the investor.

When it has been 3 or more years after the auction, the owner must redeem directly with the investor, if it still has redemption rights. By law, the redemption amount that must be paid is the taxes and the overbid and the interest.  A redeeming owner might say to the investor, "But, you already have the overbid, give me a credit for that." The investor will then say, "I don't have the overbid. It's still sitting at the county. I can't give you a credit for money I don't have. You will have to pay the full amount, including the overbid. I will then sign something saying you've redeemed. You can take that piece of paper to the county and make a claim to get the overbid money from them.

Of course, that makes it exponentially more difficult for redeeming owners with large overbids to redeem when its been more than three years since the auction. That is why, for tactical reasons, many investors with large overbids lay low, make no waves at all that would alert somebody to hurry up and redeem, and simply wait for that three year anniversary to pass.  Once that date passes, the odds of the investor keeping the property if there has been a large overbid increase dramatically.

Does your question pertain to Alabama? In Alabama counties have the choice of selling tax certificates or tax liens. In 2021, 33 counties auction tax liens. The rest sell tax certificates.

For tax certificates: They are auctioned off for taxes due, plus overbid. Highest overbid wins the certificate. They earn 8% interest on the taxes plus on that portion of the overbid that is equal to or less than 15% of the tax appraised value. All overbid over that ceiling earns no interest. Certificate holders are entitled to possession, but they must take it lawfully. If the property is legally abandoned, they can take DIY possession. Legally abandoned is not the same thing as vacant and in really bad shape and frequented by drug users. That might not be legally abandoned.  Certificate owners might have to file an ejectment lawsuit to gain the possession to which they are entitled. Unsold certificates go on to the State inventory at Alabama Department of Revenue (ADOR) where they can be purchased online at any time.  If the taxpayer has not redeemed within 3 years after the auction, then the certificate holder can surrender their certificate to the probate judge in the county where the property is located, pay a $5 fee, and receive a tax deed. Just because they have a tax deed does not mean all redemption rights are over. But, deed holders do have more legal rights than certificate holders, and it is easier to buy casualty insurance if you have a deed.

For tax liens: Bidders bid down the interest rate they are willing to receive if the taxpayer redeems. Bidding starts with taxes due at 12% per annum interest. Bidding goes down in whole 1% increments. The winning bidder is the one willing to take the lowest interest rate. In case of a tie, there is a drawing.  Lien investors have no possession rights.  All they can do is sit still and let the interest bill accumulate until the taxpayer redeems. If the taxpayer does not redeem within 3 years after the auction, then the lienholder can file a judicial foreclosure lawsuit.  It must name the taxpayer, plus anyone else with redemption rights as defendants. Usually that means any other lienholders, such as mortgage lenders, IRS, Medicaid, judgment creditors, etc.  Defendants have one last chance to redeem, during that lawsuit. If someone redeems, they must also pay the legal fees for the lawsuit.  If no one redeems, then the judge forecloses the lien in the investor and quiets title. Any liens unsold at the auction are retained at the county level and can be sold individually or in another auction or en masse to one buyer within the first 45 days after the auction. Anything unsold by that point is carried over to the next year's auction. If the taxpayer has not redeemed by that time, then two years of liens will be sold at the auction. No tax liens ever go on the state inventory at ADOR.

Thanks, @Justin Mason

@Justin Mason, taking DIY possession without an ejectment court order or a voluntary surrender of possession by the taxpayer is risky, but sometimes you have you choice because you can't find anybody.  You can't sue them if you can't find them. You can't give written notice (required if you have only a certificate) because the six month waiting period is from when they receive the notice, not when you mail it. If you can't find them, you can't send them anything they can receive. The determination is on a case-by-case basis about whether it is a good idea or not, and how to go about the DIY possession.

There are tactical reasons for taking possession either before or after the tax deed.  Those are situational, and depend on the property and the owners and other outside factors.  I wish I could give you a more specific answer.  It's kind of like asking which is better, long pants or shorts?  It depends on time of year, cold snaps, heat waves, is the A/C working, inside or outside, formal/informal settings, whether your calves  are covered with bruises from a fall, what's in the laundry and even available, whether you have a romantic partner who gets veto power, how short are those shorts, anyway? etc etc etc

@Tyson Begly, I recommend using a private process server and requiring them to video the service of process. That makes it much more difficult for the defendant to later claimed they were never served, and ask that a default judgment be set aside.

@Ned Carey, you are right! That's the value in conversations, so that people can start with seemingly divergent views and gravitate towards clarification and understanding and consensus. I wish Congress could follow our example:(

I see. In Alabama, the lack of standing defense has been judicially construed as typically more accurately defined as a lack of jurisdiction defense and very few lack of standing assertions are accurately pled.  So, a lack of standing defense that might otherwise be waivable is  almost always more accurately a non-waivable lack of jurisdiction. I think our problem, @Peter Walther, is differences in the law among different states.

Lack of standing is a jurisdictional issue, @Peter Walther, and lack of jurisdiction is never waivable. It can be asserted for the first time on appeal, and it can be asserted long after the lawsuit is over.

Let us agree that companies are allowed to do business with whom they choose, within the limits of the law (such as Fair Housing) and after weighing the risks of refusing to do business with the risks of taking on a risky customer.  But, as I've posted in other threads on this issue, if one title company will not write insurance, that does not mean there is a fundamental issue with the state of your title. You should shop for somebody else.

I never claimed any business decision by a title underwriter was practicing law. I merely said that these issues are subtle, and not easily learned through Google or Nutshells or Gilberts or even through a long-ago course in law school on Civil Procedure or Real Property or Evidence or Insurance.  Neither lay persons, nor lawyers, can legitimately go against a trial court's decision if that court has jurisdiction and the order is final and non-appealable.  Declining to write title insurance is a legitimate business decision. Doing so because you think a quiet title order is flawed, but the appeal time has expired, is questionable.  

If a company declined to write title insurance at all on any Alabama tax sale properties unless the owner had quitclaims from the former owners, that would be one matter and I think entirely acceptable. If it picked and chose based on its own opinion about whether the trial judge made a mistake of fact or law, then that is not acceptable and exposes the company to litigation from the applicant who was denied coverage.  And, before you ask, "Under what theory could they sue?" I will tell you that I was a litigation attorney for many years representing banks, developers and large corporations who were sued for an incredible variety of grievances with a dizzying array of legal theories, both old and new, recognized and novel, and nothing would surprise me about the ingenuity of plaintiffs' lawyers. 

So, that brings me back to a title company's risk assessment.  Is the risk of a bad title insurance decision worth the risk of a lawsuit by an applicant denied coverage? Inasmuch as there is no bodily injury nor injury to outrage-protected interests in Alabama (dead bodies, the homeplace, etc.) when there is a denial of coverage, then if I had a title company and had such concerns, I'd probably come down on the side of turning down the applicant.  BUT, I would do so with the understanding I am ignoring a lawful court order and making a risk assessment decision, not because I think the order is flawed and not worth the paper on which it is written.  I would also do so only if I had clearly articulated guidelines about when to grant or deny coverage, and not based on each underwriters own personal understanding of the Alabama law for an exceptionally Byzantine area, and for which there are virtually no true experts in the entire State and nothing comparable in any other state.

@Peter Walther, respectfully, judges do make mistakes, but unless overturned on appeal or made without jurisdiction, their decisions are final and are law.  For an underwriter to invade that and determine a judge made a mistake is wrong.  Judges hear and see all of the evidence, have an opportunity to observe the demeanor of the witnesses, etc. Even an appellate court will not invade those provinces of the trial judge, and will overturn only for mistakes of law. In addition, there are complicated rules regarding who has the burden of proof, and when that burden shifts.  I know of no lay persons, and very few attorneys, who are able to successfully navigate those issues.  As one recent example, the Stiff v Equivest decision regarding Alabama tax sales was most likely a failure of proof issue in a particular lawsuit, and not the "end of the world" state-wide decision most people thought. On the other hand, it might have been a global decision. Nobody would know for sure until an appellate court spoke on THAT issue.

An underwriter should legitimately investigate whether the court had jurisdiction, whether timely notice of appeal was filed, and whether the time has expired for post-trial motions.  Perhaps for an in-personam lawsuit, the underwriter should see if there are more potential claimants than just the ones named in the lawsuit. More than that invades the province of the judiciary.