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Twitty Burgers

Just a whimsical piece. I’d been talking about tax law all day long, so that was on my brain. My husband has often been told he bears a striking resemblance to Conway Twitty, back when Conway was alive. He (my husband, obviously not Conway) mentioned it a few minutes ago. So, that slammed Conway Twitty and tax law together in my brain, and made me remember a famous decision I learned in law school.

Conway got the bright idea to create a burger franchise called Twitty Burgers. Short story, it went bust, the investors all lost their money, but Conway repaid all of them, in full. Then he claimed those payments as a deductible business expense on his taxes. The IRS strongly disagreed. The case went to court. The judge who ruled in his favor also shared an “Ode to Conway Twitty” in his published decision. I thought you would enjoy it. Of course, the judge needed to stick to his day job and not go into song writing, but it is nice piece of levity for a usually boring subject.

Twitty Burger went belly up
But Conway remained true.
He repaid his investors, one and all.
It was the moral thing to do.

His fans would not have liked it,
It could have hurt his fame,
Had any investors sued him
Like Merle Haggard or Sonny James.

When it was time to file taxes
Conway thought what he would do
Was deduct those payments as a business expense
Under section one-sixty-two.

In order to allow these deductions
Goes the argument of the Commissioner.
The payments must be ordinary and necessary
To a business of the petitioner.

Had Conway not repaid the investors
His career would have been under cloud,
Under the unique facts of this case Held:
The deductions are allowed.

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New Lien Holder Redemption Decision

The issue involves a lien holder who did not receive notice of the tax sale until more than three years after auction. As you know, lien holders are given extended redemption rights in Alabama because they do not receive pre-auction notices. Investors must send CMRRR notices to all lien holders about the tax auction. The lien holder then has one year from receipt of the notice to redeem, or three years from the auction, whichever is longer.

If it is more than three years after the auction, but less than one year from the notice, how does the lien holder redeem? Is it judicial redemption with a lawsuit against the investor in Circuit Court? Is it judicial redemption by filing a redemption counterclaim after the investor files an ejectment lawsuit in Circuit Court? Or is it statutory redemption, with a petition by the lien holder in Probate Court?

This came up recently in Jefferson County. The lien holder contacted the investor to redeem. There was a difference of opinion about the value of the preservation improvements. The investor filed an ejectment lawsuit in Circuit Court. It asked for attorneys fees, which is allowed if someone answers the ejectment and asks to redeem instead of having their possession rights terminated.

The lien holder threw everybody a curve ball. It filed a petition to redeem in Probate Court, where attorneys fees are not allowed under the circumstances. The lien holder then asked the Circuit Judge to put a temporary hold on the ejectment lawsuit until redemption could be completed in Probate Court.

The Circuit Judge agreed with the lien holder that it had statutory redemption rights even though more than three years after the auction. As a result of prior Alabama Supreme Court decisions, that automatically meant Probate Court had exclusive jurisdiction over redemption. The Circuit Judge put his case on “hold,” waiting to see what happened in Probate Court. As a practical matter, once redemption could be completed in Probate Court, the investor would no longer have any claims for ejectment. At that point, the ejectment lawsuit would have to be dismissed, and the investor would not be entitled to collect any legal fees as a consequence.

This is only a decision of one Circuit Judge in Jefferson County. It is not binding on any other courts. But, it is a warning to everyone about how courts might think about this issue. Bottom line, at least in Judge Hughey’s courtroom in Jefferson County: Lienholders who still have redemption rights even after the initial three years can redeem through Probate Court. In other words (1) more streamlined; (2) faster; and (3) no attorneys fees add-on caused by defending an ejectment lawsuit with a redemption counterclaim.

Warning to investors: Don’t be so quick to file ejectment lawsuits as a tactical move when in a redemption dispute with a lien holder. You might find yourself having to pay your lawyer thousands of dollars for THAT, but not getting reimbursed by the redeeming party.

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Tax Sale Property Research

I’ve been asked for my personal checklist of property research items. This is separate from things disclosed by a property inspection, such as condition of roof, flooring, etc. Here is my list. Sometimes I run across things that cause me to investigate other matters, but this is a good start. Answers to the following questions help me evaluate risk and value.

  1. Was the assessed owner the owner on the date of the auction with no transfers or foreclosures?
  2. How did the owner acquire the property?
  3. What type of ownership did they acquire (life estate, joint tenancy, etc.)?
  4. Are there any liens?
  5. Has the property been through a prior auction? Who bought it? Why did they discontinue paying the taxes (educated guess)?
  6. What is the assessment history regarding improvements, values, homestead and over-65 exemptions?
  7. Did the tax bill go to an address different from the property?
  8. What other properties are/were owned by the same owner? Have any of them gone delinquent? Can I make an educated guess about why this property, among all that person’s properties, was neglected as far as paying the taxes?
  9. How can I be SURE as to the property address?
  10. What is nearby that might depress the value, such as gravel pit, game cock farm, junk yard, etc.?
  11. What is the neighborhood profile re: owner occupied or rental properties?
  12. Are there decent roads to the property?
  13. Is it landlocked?
  14. Is someone currently using it? Who? What is their relationship to the owner (tenant, relative, squatter)?
  15. Is the property inside an official urban renewal or urban redevelopment district?
  16. Is the property inside an Opportunity Zone?
  17. Is the property the subject of any eminent domain proceedings?
  18. Is it the subject of any unsafe structure condemnation proceedings?
  19. Are there orders in process to clean garbage, cut dead trees, etc.?
  20. Is there a stigma to the property, such as murder, suicide, sink holes, etc.?
  21. Is the property listed for sale with a real estate agent or on one of the FSBO sites?
  22. Is the taxpayer still alive? If deceased, who are the heirs? Where are they?
  23. Where does the taxpayer live? What does that information tell me?
  24. What other properties does the taxpayer own?
  25. Has the taxpayer filed for bankruptcy?
  26. Is the taxpayer in prison?
  27. Where are nearby sex offenders, if any?
  28. What does a Google search reveal about the owner and how does that affect my educated guess about likelihood of redemption and/or buying out rights via quitclaim?

I hope this helps. If you need guidance on doing the research that will answer the questions above, I have one-on-one personal training sessions (over the Internet, but no computer skills required on your end) to teach you my tricks and how to interpret what you find. Click HERE for details.

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Shelby County Tax Auction Will be Online 4/1/20

Because of COVID-19, the Shelby County, Alabama, tax auction will take place online, rather than at the county courthouse. It will still be on the same scheduled date, April 1, 2020. Remember, Shelby County switched to a lien auction system last year, and will be doing lien auctions again. For more information, visit www.govease.com (the company that will be hosting the auction platform) or Shelby County’s website at https://ptc.shelbyal.com/caportal_mainpage.aspx

As of 2:00 pm on March 23, I don’t see any links for the Shelby County auction, but continue monitoring those two sites. You will need to register at govease.com, so do that as soon as possible. They also have some online training videos that are free, about the online auction process.

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Mobile County Online Tax Lien Auction

Mobile County has now set its auction date. It will be an online lien auction on May 4, 2020. For more information, registration, and training, click HERE. The company hosting the auction is based in Mississippi, and has done online tax auctions for that state and for Tennessee. Hopefully that means everything will run smoothly.

If the link above does not work, copy and paste the following into your browser: https://govease.helpscoutdocs.com/article/97-alabama-tax-lien-auction-overview

Remember, this is a tax LIEN auction, not the old-fashioned tax certificate auction. There will be no rights of possession, no ability to make improvements, but also a much shorter and easier path to clear title with the ability to get title insurance. If you are unclear about the differences, and how that affects your strategies, think about signing up for our Intro to Tax Sales class, HERE. Even if you’ve taken it before, a LOT has changed in the last couple of years: some bad things, some great things, and some new opportunities.

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Question of the Week: Mentoring Services

Everybody asks, but I rarely have any vacancies for new clients. Right now, there ARE some available slots for new mentoring clients in Alabama tax sale investing. Clients are provided 10 target properties that have been vetted and a strategy identified, complete with cost and profit estimates. Choose among package profiles:

  1. High Dollar Redemption Income (more than 12%)
  2. Rental Properties
  3. Flipping (tax certificates and tax deeds)
  4. Blended portfolio of the above strategies

Mentoring services include step-by-step instructions and personalized service for your individual package of properties.  Photos, spreadsheets and market analysis available for all properties.  Reputable third party service providers (such as contractors and property managers) are also identified.

Already know HOW to do it, and just need someone to identify properties for acquisition?  Those services are also available.

Denise Evans
THE nationally recognized expert in Alabama tax sale investing

Call 205-646-0453 to discuss your needs, or email Denise@TaxSales-Alabama.com

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When Can You Quiet Title After Tax Sale?

I’ve been hearing rumors lately about lawyers telling people they can’t quiet title on their tax sale property until at least 10 years after the auction, 10 years after the tax deed, or never. Take your pick. They are all wrong.

I can’t imagine why anyone would say “never.” That’s just completely not true.

The ten year urban legend comes from lawyers remembering the 10 year number from law school. If there is a boundary line dispute or a title issue, and one party has possessed the property and paid the taxes for 10 years,they can quiet the title. That is because the 10 year statute of limitations has expired.

Tax sales have a special and different rule. It is called the Short Statute of Limitations, because it is only 3 years. So, let’s start with that.

If a tax sale is void, it can be “cured” by 3 years of adverse possession after the tax deed date. That is when someone can quiet the title. That’s similar to the 10 year general rule that lawyers remember from school, but shorter.

If the tax sale is valid, then we have to think about redemption rights, not statutes of limitations.

When will all the redemption rights have expired? Some experts say 3 years after the tax deed, no matter what. An investor can surrender their certificate and get a tax deed three years after the auction. So, those experts think you can quiet title 6 years after the auction.

Some experts say that as long as the investor is exclusively and peaceably in possession on the tax deed date, then all redemption rights are over when the tax deed is issued, and title can be quieted on that date.

All of those opinions are related to something called “judicial redemption rights.” The law is in flux right now for a variety of reasons related to new interpretations of old statutes, and new statutes that might have changed things.

I, personally, would file quiet title as soon as I got my tax deed, assuming I was exclusively and peaceably in possession on that date.

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Inheriting a Tax Certificate

The email question asked, “My mother owned several tax certificates. She died last year. In her will, she left her entire estate to me. Does that give me the tax certificates, and allow me to get tax deeds? The local probate judge says I cannot get deeds unless I have a written assignment of the certificates. The judge says the will does not qualify as an assignment. Is that right?”

As a starting point, the statutes are very clear that tax certificates can be assigned “in writing or by endorsement.” An endorsement is like endorsing a check. You remember checks, don’t you? Of course, a written assignment on a separate piece of paper is always safest, though.

But, what about a will? Does that qualify? For over one hundred years, Alabama courts and Attorney General opinions said, “No.” Then, in 2012, someone asked, again, for an Attorney General’s opinion on the subject. Government officials can ask for an AG opinion about something related to their job. Not you or me, though. Don’t get your hopes up about free legal advice.

The AG’s opinion, Number 2012-012, says the Alabama Supreme Court decision that started all the trouble ACTUALLY said something different than what everybody thought. That’s not uncommon, by the way. Those old 1800’s decisions are really hard to read. Some people don’t even try. They rely on Headnotes, which are kind of a “cheat sheet synopsis” of the court opinion.

The AG said that when you read the entire decision and all of the facts, it was clear the Supreme Court said the local probate judge could not issue a deed to someone because they were not an actual heir, NOT because heirs could not inherit tax certificates under a will.

As a result, the AG revoked all of its prior opinions that relied on that decision. The opinion says, “Yes, you can inherit a tax certificate under a will, and receive a tax deed.”

Of course, that leaves open the question of what happens if someone dies without a will. Nobody knows, for sure. Maybe probate will have to be opened. Let’s hope this issue never comes up for any of you!

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“For Sale” Signs on Property

Putting “for sale” signs on tax sale properties comes up often. Today, I received a question from someone who had been given a price quote by the State, planned to pay the full quoted price, and would receive a tax deed. Her question was, “Can I immediately put a sign up indicating I will own this property soon, and asking people to contact me if they are interested?”

There are several reasons why she cannot, and SHOULD not, put up such a sign until AFTER she has her deed.

  • It is not her property until she actually receives the tax deed. If she puts up a sign, she is trespassing and could be subject to criminal prosecution.
  • Just because she is willing to pay the quoted price does not mean she will get the deed. Taxpayers sometimes redeem right before the deed is signed by the Governor. That happens because the State is legally obligated to notify the former owner before the tax deed is signed, to give them the chance to redeem before that happens.
  • Shining a spotlight on a good property might cause a vulture investor to buy up the taxpayer’s rights and redeem it from the State. The lady who asked for the price quote will lose her deal. Laying low is the best policy, until she has that deed.

Another person’s “sign” question had to do with posting a property as “No Trespassing” and if that were enough to establish possession. Answer: It is an indication of possession, but is not enough all by itself. If you do not want to get an ejectment order, do as many things as you can to take possession. Rent the property out, even if just for garage sales or growing turnip greens. Put up “For Sale” signs. You don’t have to actually sell it to anyone who asks. Keep the grass cut or the frontage mowed. Put out survey stakes approximately along the property line, every 10 or 12 feet, with orange flagging on them. Put your phone number on a No Trespassing sign. The thing about possession is that it is supposed to alert people there is a “new Sheriff in town” and they should ask questions if they are the former Sheriff.

Remember, if you have a question, you can always write. If it’s something I think might interest other people without giving away any of your tactics or secrets or identify, I might make a blog article about it.