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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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Question of the Week: Quitclaim Deeds

From an email, “Hi Denise. Does a quitclaim deed from the former owner give me good title to a tax sale property?”

There are several issues involved in answering this question.

(1) A quitclaim deed transfers all real estate rights from the grantor to the grantee. It does not make any warranties (promises) about whether the grantor actually owns anything at all, or the existence of redemption rights. The taxpayer might have already sold the property to somebody else. A creditor might have executed on their rights. If the taxpayer does not have good title, you will not have it just because you receive a quitclaim deed.

(2) If the investor has a tax deed, it is now the technical owner of the property. A quitclaim deed from former owners will remove title defects by destroying redemption rights and any other claims former owners might have.

(3) If the investor has only a tax certificate, then a quitclaim deed from owners might be dangerous. To understand this, you need to think about the fact that a tax auction trumps virtually all liens except those by local government. They have redemption rights, but they can’t just foreclose and take the property away from the investor. If the taxpayer redeems, all those liens come right back. If a taxpayer quitclaims his rights during the first three years, then the investor does not yet have his own deed. His only route to deed ownership is because of the taxpayer’s quitclaim. I think that the quitclaim carries with it all the baggage of the liens, just the same as if the taxpayer had redeemed. But, if the investor already has a tax deed, then the quitclaim deed just wipes out the redemption rights. That is because the investor already has ownership, he doesn’t need the quitclaim deed to obtain ownership, just to get rid of redemption rights. Be careful about this. If you have only a tax certificate, you might want to obtain a release of redemption rights, not a quitclaim deed.

(4) If the taxpayer has died, you need to make sure you obtain quitclaim deeds from ALL heirs. Usually you need an affidavit from a relative describing who was alive at the time the taxpayer died. Was there a spouse? Children and/or grandchildren? Stepchildren? Parents, aunts, uncles, cousins, nieces or nephews? Download our free article about “Who is the Heir if Someone Dies Without a Will” to then figure out whose signatures you need. Not everybody who claims to be a heir, really is. Some people are heirs and don’t yet realize it. Until you spend money on a property. Then they’ll come out of the wood work. Getting heirs’ signatures is not hard, but you have to make sure you do it right.

(5) If you can get quitclaims from only some heirs, then you are a co-owner with the other heirs. That is not all bad. You can make improvements, buy insurance and pay taxes, but they are obligated for their proportionate share. If they show up and cause problems, you can make them pay their share and, if they don’t, you can foreclose on them. But it also means that any rents you collected have to shared, too. My advice: If you can’t get signatures from ALL the heirs, then get the ones you can, and file a quiet title lawsuit against the rest.

(6) Make sure you use the right form. This might not be so important if you are receiving the quitclaim deed, but it is critically important if you are giving one. Not every document with the words “Quitclaim Deed” at the top do the job correctly. If the wrong language is in the legalese, then it might really be a warranty deed. Use a lawyer, or use a form from a reputable source.

(7) Comply with the recordation requirements for your jurisdiction so you can record it in the real estate records. There are some local variations. Tuscaloosa County, for example, wants you to list the Source of Title at the top of all deeds. In other words, what was the book and page number of the last recorded instrument related to your deed? If it was a tax sale, then you’ll also need to put the book and page number of the instrument by which the taxpayer originally gained title to the property. For all counties, you will need to state in the deed whether parties are married or single. At the top, you will need to have the name and address of the person who prepared the deed. You will also need the name and address of the person who should receive tax notices. Signatures will have to be notarized. You cannot make any handwritten changes on the deed.

(8) Finally, remember this: When someone makes a decision to sign a quitclaim deed, the faster you get it signed the less risk they will change their mind. I recommend taking the deed and a notary public to the person signing, and getting it done right away. You can notarize a quitclaim deed to yourself. For more information on how to become a notary, check out Jefferson County’s website, HERE. All counties are very similar. It is an easy process with very minimal expense.

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Question of the Week: Quitclaim & Quiet Title

This question comes from someone who bought a tax deed from the State two months ago, found the former owner, and wants to obtain a quitclaim deed from that person. The investor asked, “If I get a quitclaim deed, can I file my quiet title lawsuit right away, without having to wait three years?”

The answer is that the quitclaim deed gives him the owner’s redemption rights. Afterwards, those rights no longer exist since the tax deed and the redemption rights kind of got merged into each other, and now only the deed survives and is the winner. Quiet title lawsuits are to get rid of other people who might have rights in the property. The quitclaim deed does that all by itself, assuming there are no other owners and no lienholders. A quiet title lawsuit is not even necessary.

If there are lienholders, the investor might have to send out the certified letters and wait one year from RECEIPT (not from date of mailing) to clear out those redemption rights. After the year, the investor can file the relatively fast and cheap and easy in personam quiet title lawsuit. No guardian ad litem (GAL) is required because the GAL represents the interests of the unknown defendants. If all of your defendants are known and you can serve lawsuit papers on them, there is no need for a GAL.

In the question I received, there were no lienholders and no other person with ownership rights. In that case, with a quitclaim deed, the investor is good to go. I told him to approach a title insurance company to get title insurance on the property. That way, if there are any surprises, he learns about them BEFORE he gets ready to sell or finance.

Do you want to learn more about easy tax sale strategies to make wise decisions, avoid problems, and speed up the process? Check out the Alabama Tax Sale Investing introductory course, available live at locations around Alabama or over the Internet. Click HERE