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Redemption Rights After a Tax Sale

Posted by 15789465 on

This issue comes up ALL the time. Finally we have some guidance from the Alabama Supreme Court. After a property is sold for unpaid ad valorem taxes, the owner has three years to redeem.  The cost to redeem starts with the amount paid at the auction, plus 12% interest.  If the tax sale purchaser paid real estate taxes in subsequent years, those will also have to be reimbursed, plus 12% interest. If the property contains a residential structure, the redeeming owner will also have to pay insurance premiums and the value of "preservation improvements." When the owner wants to redeem, he or she goes to the local Probate Judge's office. The Redemption Clerk looks up the tax sale auction payment, any subsequent taxes paid or due, and calculates 12% interest on that number. The owner pays that amount and receives a Redemption Certificate. The Redemption Clerk then notifies the tax sale purchaser that money is waiting for them in the Probate Judge's office because of the redemption. What if the property contained a residential structure?  The purchaser is entitled to additional sums, but the Redemption Clerk just issued a Redemption Certificate! Who is entitled to possession of the property? Does the owner have to pay the additional sums before redemption is complete, or is it now already complete and the purchaser just has a claim against the owner for additional money? No one knew the answer until very recently.  Arguments sometimes became very heated when the owner showed up and demanded possession, but the investor or its tenant refused to vacate.  On occasion, firearms were involved! On August 27, 2010, the Alabama Supreme Court issued its opinion in the case of Ross v. Rosen-Rager. Here's the background of that lawsuit: Ms. Campbell had a mortgage on her property, in favor of MERS.  She failed to pay her real estate taxes, and Madison County sold the house at the annual auction. Ross bought the property, and put tenants in possession.  MERS then foreclosed on its mortgage, and redeemed from the tax sale by paying the amount calculated by the Redemption Clerk, but no insurance premiums or value of improvements. MERS later sold the property to the Rosen-Ragers. The Rosen-Ragers demanded possession, and Ross refused to deliver it. Ross continued to put new tenants in the property. Everybody landed in court. The Alabama Supreme Court said that redemption occurred when the Redemption Certificate was issued by the probate judge's office.  Yes, there might be additional money owed to Ross, but that did not affect the date on which redemption occurred.  When the case was tried in Madison County, the jury imposed compensatory and punitive damages against Ross for his refusal to deliver possession.  To be fair to the jury, Ross did seem to act in a very high handed and confrontive manner, and did have a long history of this type of activity. To be fair to Ross, no one knew the answer to this question, and there was no appellate direction, so he can hardly be faulted for making the wrong decision. Despite that, the Alabama Supreme Court upheld the award of punitive damages. The court said the only remedy Ross had at the time was to contest the redemption certificate. In my next post, I'll tell you how you can do that, if you find yourself in a similar situation.

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6 comments

  • With the caveat that I am not licensed to practice law in Alabama, (only Texas, which doesn’t count in Alabama) and this is not legal advice:

    Additional research seems to indicate that common law certiorari is not available. “The function of the common law writ of certiorari extends only to questions touching the jurisdiction of the subordinate tribunal and the regularity of its proceedings. The appropriate office of the writ is to correct errors of law apparent on the face of the record. The trial is not de novo, but on the record, and the only matter to be determined is the quashing, or affirmation, of the proceedings brought up for review. Town of Camden v. Bloch, 65 Ala. 236; McAllilley v. Horton, 75 Ala. 491.” Jefferson County v. Berkshire Development, 277 Ala. 170, 173, 168 So.2d 13, 16 (1964)

    deniselevans on
  • the answer to your question “Is Deutsche bank on petition for cert to the Supreme Court?” is no, the judgment in that case is now final

    i don’t want to abuse the service you are providing but no one here in huntsville seems to know how to deal with this.

    the probate judge has issued a certificate of redemption for several properties i have purchased at tax sale and leased out. no one knows if i should evict the tenants, or file for an extraordinary writ, in order to comply with the court ruling to avoid further punitive damages.

    one of the certificates of redemption was issued to an heir of the owner, pursuant to 40-10-120. noone knows if the heir is entitled to possession or whether the heir is liable to pay for improvements or insurance. (another was also issued to a mortgagee and another to a judgment creditor)

    howard ross on
  • Is Deutsche bank on petition for cert to the Supreme Court?

    I don’t know off the top of my head which case trumps the other if you have a final, published, decision by the Court of Civil Appeals that rules “Night” and an unpublished Supreme Court decision on motion for rehearing that rules “Day.” The best approach right now is to be cautious, I think.

    That’s horrible about the summary judgment on wantoness. I think that’s wrong. I always thought the stronger argument was no redemption until payment of ALL charges. Alabama Code Section 40-10-122© says: “With respect to property which contains a residential structure at the time of the sale regardless of its location, the proposed redemptioner must pay to the purchaser or his or her transferee, in addition to any other requirements set forth in this section…”

    If he/she is only a “proposed redemptioner” after paying the money into the probate court, then that means he/she has NOT YET redeemed!!! At least, that’s what I always thought. So, it turns out that I was wrong, but I think the statutory language is enough support for a person’s good faith belief that redemption had not yet occurred, especially since there was NO appellate court interpretation of this issue.

    Also, the “redemption certificates” I’ve seen just say that the owner “has made application to redeem.” They don’t recite that he/she has actually redeemed.

    Keep up the comments, and thanks for writing. This is a really important subject.

    deniselevans on
  • ross v rosen-rager case is on rehearing in supreme ct

    ross v deutsche bank is not reheard/certiorasri and judgment is final

    is appeal ct ruling currently the law of land for possession until supreme ct rules on rehearing? (not to mention that in rosen-rager the trial ct entered a summary judgment against ross for WANTON trespassing and the supreme ct affirmed because they said there was no legal basis for ross to maintain possession after the certificate of redemption was issued)

    also you are correct about the nightmare of purchasers haqving to file for certiorari every time the probate judge/tax collector issues a certificate of redemption – which is every time (regardless of whether there have been improvements). i thought the legislatures scheme in 40-10-122 was to avoid litigation, not create it (see long v king)

    howard ross on
  • As I stated in my reply to your second comment, I think the common law writ of certiorari is the proper way to contest a tax sale redemption. You should obtain legal advice before making any decisions in this area, however.

    The Alabama Court of Civil Appeals case, Ross v. Deutsche Bank, was an interesting “companion case.”

    For those of you who cannot read the case, this is what happened. The Deutsche Bank case was originally appealed to the Alabama Court of Civil Appeals and then transferred to the Supreme Court, which was the proper appellate court. The Supreme Court “claimed dibs” on the case, and then transferred it back to the Court of Civil Appeals and asked them to decide! This is fairly common. It’s kind of like a family chain of command thing. If you are a boy and want to go to a party, you might go to Dad first because you think he’ll be more sympathetic. Dad might say, “You know, Mom always makes decisions about how you spend your evenings away from the house.” So, you get kicked over to Mom for a decision. Many times, Mom might THEN say, “I don’t have time to think about this right now, ask your Dad and whatever he says, goes.” So there you are, back in front of Dad, but you had to take the right route. If you don’t like Dad’s decision (or the Court of Civil Appeals, when a case has been referred to them by the Supreme Court) you can always ask Mom to overrule Dad. This is called statutory certiorari (not to be confused with common law certiorari) when you are in the courts. Whether “appealing” to Mom, or asking the Alabama Supreme Court for certiorari to review a decision of the Court of Civil Appeals, it’s going to be real hard to reverse Dad’s decision. It usually doesn’t happen.

    I’m explaining all of this so you understand how it is that the Supreme Court AND the Court of Civil Appeals both had reasons to address this issue.

    Deutsche Bank foreclosed on property in 2006. Ross purchased the same property on May 11, 2007 at the tax sale. On July 27, 2007, the bank paid the tax sale purchase price plus accrued interest to the probate judge, and obtained a redemption certificate. On October 23, 2007, the bank’s lawyer delivered a letter to Ross asking for an itemized list of additional fees required for redemption. Ross replied with the value of certain improvements, and the amount of insurance premiums. Apparently these sums were not paid by the bank. Despite that, it sued Ross and asked the court for an order saying that the bank owned the property, and that Ross was not entitled to possession. The trial court ruled in favor of the bank, saying there wasn’t any need for a trial because as a matter of law the bank had redeemed when it obtained the redemption certificate. So, the trial court entered an order giving the bank everything it asked for. On appeal, the Alabama Court of Civil Appeals said Ross was entitled to be reimbursed for his insurance premiums. The amount of that reimbursement, and whether it was actually made or not, was a factual issue, which required testimony to be presented. As a result, the decision in favor of the bank was reversed by the Court of Civil Appeals. The case was sent back to the trial court so it could take testimony.

    The bottom line was—the Court of Civil Appeals held that redemption was NOT complete just because the redemption certificate had been issued. On the same date, the Alabama Supreme Court held that redemption WAS complete when the redemption certificate had been issued, unless attacked in the courts in some manner. Even though the Court of Civil Appeals decision came about only because the case had been referred by the Supreme Court, it does not have the same precedential value as a Supreme Court decision. I think the lawyers in both cases will file motions to reconsider, and we can probably expect to see a new decision clarifying this issue.

    Frankly, I think it will be a nightmare if tax sale purchasers must resort to the courts from now on in order to get paid for preservation improvements and insurance premiums when an owner redeems tax sale property that contains a residential structure. I also personally think that filing a lien is not the right answer, because there is no statutory authority for doing this, and I cannot think of any common law right to a lien in this situation. I think that if the tax sale purchaser filed a lien, and the redeeming owner wanted to sell the property or refinance, they could then sue the tax sale purchaser and ask for damages for clouding their title! But, then, that’s just my personal opinion, and if I knew everything, we wouldn’t have to waste money on an appellate court system, would we?

    deniselevans on

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