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Unpaid Fire Dues and Tax Sales or Foreclosures

Posted by 15789465 on

If you buy tax sale property, and there is an unpaid fire dues assessment, who wins in the battle of the liens? That is the question one of my seminar attendees asked me. I did not know the answer, but offered to find out. I still don't know the answer, for sure, but here's my best opinion:  The fire dues are treated the same as a municipal assessment for sewer improvements, weed-abatement liens, and demolition liens. In other words, they trump the tax sale. The tax sale purchaser (or foreclosure investor, for that matter) will have to pay the dues or lose the property.  This is unlike the battle between a tax sale investor and a bank.  In the case of a bank mortgage, the lender must redeem from the tax sale before it can take the property.  Not so for municipal liens and, apparently, fire dues liens.

Note: As a matter of general interest, you might like to know the redemption rules when there has been a foreclosure of a municipal or fire lien.  At the foreclosure, the purchaser receives a deed and immediately receives all right, title and interest to the property, subject only to redemption rights. (Ala. Code §11-48-49)  The former owner has two years to redeem by paying the purchase price plus 6% interest. There is NO provision for payment of any improvements or insurance premiums during that time period. (Ala. Code §11-48-54)  After the two years has expired, ANY person can apply to the probate judge for a Certificate of Warning to Redeem. (Ala. Code §11-48-56). The former owner has 60 days from the Certificate of Warning within which to redeem, but if it redeems during that extended time period, it is liable for the value of improvements.  (Ala. Code §11-48-58).  If six years passes after the tax sale, without there being a Certificate of Warning to Redeem, then all redemption rights expire. (Ala. Code §11-48-55)

If you lawyers want to read the cases that I read in coming to my conclusion, to see if you agree or not, here they are. No case is on point. You just have to read and figure out which way the wind will blow.
  • First Properties LLC v. J.P. Morgan Chase Bank, 993 So.2d 438 (Ala. 2008)
  • Special Assets LLC v. Chase Home Finance, 991 So.2d 668 (Ala. 2008)
  • Special Assets LLC v. United States Bank, 902 So.2d 711 (Ala. Civ. App. 2004)
  • Minor Heights Fire District v. Skinner, 831 So.2d 609 (Ala. Civ. App. 2002)
  • Holmes v. Concordia Fire District, 625 So.2d 811 (Ala. Civ. App. 1993)
  • Brown v. Minor Heights Fire District, 221 B.R. 849 (N.D. Ala, SD, 1998)

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  • how do municipal/fire liens relate to the lien for real estate taxes pursuant to Ala Code 40-1-3 which specifies superiority of the tax lien – does a foreclosure of the tax lien by tax sale cut off municipal/fire liens and leave a right of redemption?

    howie on
  • does the irs allow the right off of the value of donated property or its purchase price if within 1 year of purchase. i was instructed to file schedule e on tax returns with tax sale purchased rental houses after 3 years and use the purchase amount as the original basis for depreciation – don’t know if there is a correlation

    howie on
  • i will try to do some research on this – the reason i asked the question was because someone i know purchased a condominium at the last tax sale and he asked me if he was obligated to pay the condo dues or risk foreclosure of his interest and, if not, does he have to pay them after 3 years from the sale, even though the original owner is still in possession.

    howie on
  • Howie, I am just guessing here. There is no case authority, and I don’t have time to do the in-depth theoretical research on condo liens that might lead to an answer that would be the same as the Alabama Supreme Court might reach. So, my best guess is—condo dues before the tax deed is issued, the condo association must redeem before it can foreclose. Condo dues after the deed is issued, the condo association can foreclose without redeeming. Yes, I am aware of the Attorney General’s opinion that says a tax certificate owner has all the incidents of ownership and must maintain property or risk loss in a nuisance lien action. (1) It is only an AG’s opinion, and some of them have been wrong over the hears, in the area of tax sales. They are instructive because they might cite cases you cannot find yourself, but they are not legal authority; (2) The equities are different. If you have a right to occupy property, you probably have the obligation to cut the weeds, which would seem to go along with possession. Condo dues are different.

    Denise L. Evans on
  • i am confused – in the three year redemptive period after a tax sale can a condo association foreclose on the purchaser’s interest – or is there only remedy to foreclose on the title holder and then redeem from the purchaser – what happens after 3 years and the purchaser gets title – can the association then foreclose on the purchaser and if so can the association claim an encumbrance against the purchaser for any dues accrued during the 3 year redemptive period?

    howie on

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