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Redemption Rules

Posted by Denise Evans on

This advice applies to foreclosure redemption and tax sale redemption.

The redemption process usually starts with a written demand for lawful charges. It does not have to be any particular form. It does not have to be certified mail. It can be an email.  The November 6, 2015 decision in Wall to Wall Properties v. Cadence Bank (Alabama Court of Civil Appeals, by assignment from the Alabama Supreme Court) held that a motion placed on the AlaFile online system for lawsuits, and then transmitted via email by the system, met the requirement of a "writing."  For you tax sale investors, I think that if an owner contacts you and asks you to sign the County affidavit, that qualifies as a written demand, also.

This is REALLY important because of what must happen after that written demand.

  1. It starts the mandatory arbitration process and deadlines, as described below.

  2. It establishes the LAST day the investor is entitled to anything, because the redemption process has now started. Additional improvements made after that date cannot be recovered by the investor. Rents earned after that date must be credited to the former owner.  If you sign a new lease after that date, you might be liable to the former owner for compensatory and punitive damages, on top of not getting to keep the rent.  You also might be liable to the tenant for fraud, even with a cancellation clause in your lease.

If the former owner disputes the charges claimed by the investor, then the demand for lawful charges starts the deadlines for the mandatory arbitration process. That's what the courts call it, when they discuss the process. I'm telling you that because when I call it "mandatory arbitration" it seems to be taken more seriously by people.  It is the same for foreclosures or tax sales.  

By the way, when a notice is required by a certain deadline, it must be RECEIVED by that deadline. You can't just drop something in the mail on the last day. Lots of people know about something called "the mailbox rule" and they think it means that if you put something in the mail by a deadline, then it is timely. That's  not true. Plus, the "mailbox rule" relates to withdrawing a contract offer before someone else accepts it and creates a binding contract. It is not the sort of all-purpose rule people seem to think it is.

This is the process, the deadlines, and the consequences of missing deadlines:

  • Investor has ten days after written demand to provide the itemized list of  lawful charges.
    •  If investor misses its deadline, it is NOT entitled to any compensation for improvements.

  • Former owner has ten days after receipt of itemized list to contest the amount. The method of disputing the charges is to appoint a referee and notify the investor of the the former owner's disagreement, and the name of the referee.
    • If the former owner misses its deadline, it loses the right to dispute the value of the improvements.  It does not lose the right to dispute whether something is a preservation improvement or not, if it is a tax sale redemption. 

  • After the former owner appoints a referee and notifies the investor, the investor then has ten days to appoint its own referee.
    • If the investor misses its deadline to appoint a referee, it forfeits the right to compensation for the improvements.

  • The two referees have ten days to come to an agreement regarding the value of the improvements. If they are deadlocked, they must at once appoint an umpire. There is no penalty if the two referees miss their deadline.

  • If an umpire is appointed, the two referees and umpire have 10 days to reach a decision. If two of them can agree on a value, the majority rules. If they cannot come to an agreement, there is no penalty to the investor or former owner.

Finally, who is allowed to serve as referee or umpire? Anybody. It can be an appraiser, real estate agent, professional mediator, lawyer, your mother, your child's soccer coach, or a complete stranger you flag down on the highway. There are no requirements for being a referee or umpire.


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  • Denise, what if the investor has already sold the property when the former owner notifies that the redemption process is being started?

    Tami Roberts on
  • What if the previous owner phones you and tells you he plans to redeem? Is that considered the start of the process? I just had the exact same situation happen last week. Owner called and told me I would hear from his lawyer this week. He did not ask me to sign anything yet.

    Alan Hilton-Nickel on

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