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Tax Sale Redemptions in Alabama: Shocking New Supreme Court Decision

Posted by 15789465 on

On November 24, 2010, the Alabama Supreme Court issued a shocking new decision that dramatically affects all tax sale purchasers.  The issue involves redemption rights, and whether the former owner must pay insurance premiums and preservation improvements before redeeming. The case is Ross v. Rosen-Rager. You can read the entire opinion by clicking HERE.  My synopsis follows below. The case is factually complicated.  In a nutshell, though, it involves a tax sale purchaser (Howard Ross) and an attempted redemption. There were several people involved in the redemption and the later sale of the property by the redeeming party.  Those facts are not really important to the decision, so we'll just call all of them, generically, the RP (for "Redeeming Party." ) The RP went down to the local Probate Judge's office and asked for the charges necessary to redeem. The RP was told the charges known to the Probate Judge, being the tax sales price, plus subsequent year's taxes, plus 12% interest.  The RP paid, and was given a redemption certificate. The Probate Judge was under no legal obligation to contact Ross to see if any additional money might be owed to Ross. As a matter of fact, the property contained a residential structure.  Because of that, Ross was entitled to be reimbursed by the RP for Ross's insurance premiums, and for the value of "preservation improvements" on the property. The RP did not pay these charges to Ross. Ross claimed redemption was not successful as a result, even if the RP did have a piece of paper called a "Redemption Certificate."  Ross refused to surrender possession of the property.  The RP sued to have Ross kicked out, and asked the court for compensatory and punitive damages! The jury found against Ross, and gave the RP possession, compensatory damages, and a whopping $350,000 in punitive damages! On appeal, Ross argued that the whole case should have been thrown out of court in the beginning, because redemption did not take place until he was also reimbursed for his insurance premiums and paid for the value of his preservation improvements.  If redemption did not take place, then the RP was not entitled to possession. Howard could continue to enjoy possession of the tax sale property, and could rent it out to anyone he wanted. Among other arguments, Ross said that the redemption statutes describe what charges should be paid to the Probate Judge. Next, the law says, "The proposed redemptioner shall also pay..."  Ross thought that if the RP was still a "PROPOSED redemptioner" after paying the Probate Judge, then that means redemption was not yet complete. Ross also argued that if he had to surrender possession of property without getting his other charges, he would have no leverage to use to collect that money, and would have to hire an attorney and sue each time, get a judgment, and then try to collect that judgment.  The burden would be so great, that it would dramatically discourage people from buying at tax sales. This is despite the fact that the Alabama courts and legislature have always said they want to encourage tax sale investing, not discourage it. Unfortunately, the Alabama Supreme Court did not agree with any of Ross's arguments. They said that once the Redemption Certificate is issued by the Probate Judge, the tax sale investor is not entitled to possession any longer.  The Supreme Court said the investor may file something with the courts to protest the redemption. They did not say:
  1. WHAT the investor should file (this is a very complicated and technical field, and there are no statutes that say what an investor should do. The Supreme Court didn't say. They threw out some suggestions, but I don't think any of them will work);
  2. HOW LONG the investor has within which to file something;
  3. WHO is entitled to possession after the protest but before a decision;
  4. HOW the whole 10-day letter thing about the value of preservation improvements is supposed to inter-act with this strange protest filed in the courts; and/or
  5. WHETHER or not the investor has a lien on the property for the additional charges.
Mr. Ross will be contacting some attorneys who specialize in procedural questions like this.  He will be trying to obtain a road map regarding WHAT a tax sale investor should do in the future.  As he obtains advice, he will share it with me and I will share it with you. If any of you have attorneys with advice, please let me know their words of wisdom. If any of you have contacts in the State Legislature, let me know so I can share with them my thoughts regarding some much-needed changes in the Alabama tax sale statutes, especially as regards redemption. I wish I could be more optimistic regarding this situation.  Be very careful when faced with a demand for possession by a redeeming party who has not yet paid for your insurance premiums or preservation improvements.  Ask for legal advice before taking any action. One last word--this is about filing liens for insurance premiums and preservation improvements. I know this a widespread practice. I would never do that, myself. I do not know of a single statute or court decision that gives the tax sale investor a lien for those charges.  If nothing specific gives you such a lien, you probably cannot file a lien, lawfully.  If you file a lien when you are not entitled to, the redeeming party might be able to sue you for something called "slander of title" AND get punitive damages from YOU!  But, that's just my opinion. If I knew everything, I'd be a highly paid "talking head" on some television news program, instead of just a modest author and seminar speaker. My advice to you: Do not file any liens unless an attorney licensed in the state of Alabama, and who has malpractice insurance, tells you it is okay.  Don't be embarrassed to ask for proof of insurance!  This is just good business. If anyone gets offended, then they probably don't have malpractice insurance, and you should act accordingly.

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  • note that the trial court judgment did not find that no improvements were made and apparently did not express a basis of its order for possession predicated on no improvements having been made -

    but the supreme court rulimg specifically says it made the findings NECESSARY to support the judgment, those findings being that no improvements were made.

    my question is how could such a finding be NECESSARY if the property was already redeemed when the certificate of redemption was issued?

    howard ross on
  • I think your depth and breadth of knowledge on tax sales far exceeds that of the majority of lawyers in the state, and your analytical skills are also impressive. But, it is my humble opinion that the decision does not support your conclusion. The Alabama Supreme Court “stepped sideways” on the “when does redemption occur” issue in Espinosa. They said, basically, “We don’t have to address that question because the trial court obviously found that no improvements occurred. If there were no improvements, we don’t have to decide if redemption took place before or after payment for the improvements. So, we’re really glad we dodged that bullet and can decide this case on other grounds.”

    deniselevans on
  • of course i read things as a layman would because i’m not a lawyer, but:

    the supreme court held that IT INFERRED that the trial court found that there were no improvements of value because it was a finding that was NECESSARY to support the trial court’s decision (even though a certificate of redemption had been issued).

    a copy of the relevant part of the espinoza opinion is pasted below:

    Jabez did not pay insurance [*31] premiums on the property. Further, we infer that the trial court determined either that Jabez made no “preservation improvements” or that any such improvements had no value. Fitzner Pon-tiac-Buick-Cadillac, Inc., 578 So. 2d at 1063 (“Because this case was tried ore tenus, this Court will assume that the trial court made the findings that were necessary to support its judgment ….”).
    howard ross on
  • I disagree regarding the precedential value of Espinoza v. Rudolph< and the inferences you draw from the decision. As is common with appellate courts, every attempt was made to avoid overturning a trial court decision. The Alabama Supreme Court held that it did not rule on many issues because it did not need to rule on them for various technical reasons. I don't think you can use that to build a negative inference that they reached certain conclusions by implication. For those who want to read the entire Espinoza decision and form your own opinion, you may link HERE and read it online or download it.

    deniselevans on
  • yes-tax sales are not new, but the redemption statute was only recently modified to include reimbursement for improvements as of year 2003 tax sales

    however, that new statute borrows heavily from the language of mortgage foreclosure redemption statutes and case law and those laws are about as old as alabama and have always ben held to require payment to the purchaser for improvements (or a valid excuse for nonpayment) before property is consdidered redeemed and the redemptioner is entitled to possession (or credit for rent)

    if the statutes are worded the same the “old dirt” comes with the new statute

    howard ross on

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