Category: Redemption

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.

This question comes from an investor who wants to buy a tax sale property that has a sewer lien on it. He’s willing to do that, and pay off the lien, because the property is worth it. But, he’s concerned that if the taxpayer redeems, will be be repaid for the money he spends to clear the sewer lien?

The answer is, YES., according to the Alabama Supreme Court decision in Morris v. Card, 223 Ala. 254, 135 So. 340 (1931). It is an old case, involving a 1919 tax sale, but it is still valid law. The investor paid off some sidewalk and street improvement assessments. The court said those amounts should have been included in the redemption calculations. For you lawyers out there, the actual quote from the court is at the end of this article.

What other things might this apply to? I think paying off HOA liens would use the same logic. What about paying HOA dues to avoid liens, or cutting the grass to avoid a nuisance lien? There is no statutory or court guidance on those issues, but I think it is logical that you should be paid to do things that prevent liens, just the same as you are entitled to payment for clearing liens.

Properties with local government liens usually do not get redeemed because the price tag is just too high. People usually have truly abandoned the property, because of the liens and the fear of foreclosure. That makes them good properties to target. To learn about other tax sale strategies, many of which are VERY profitable with almost no competition, come to one of our Advanced Tax Sale Strategies classes, or purchase the video. For more information, click HERE.

The actual quote from Morris (223 Ala. 258, 135 So. 343) is “The decree fixes the amount necessary to redeem and takes no account of the sidewalk and street improvement assessments paid by Morris to clear the property of said liens. These amounts should have been included in the amounts necessary to redeem. Wartensleben v. Haithcock, 80 Ala. 565, 570, 1 So. 38; Cobb v. Vary, 120 Ala. 263, 24 So. 442; Turner v. White, 97 Ala. 545, 551, 12 So. 601; Acts 1915, § 240, p. 475. For the failure to allow such municipal taxes and assessments amounting to approximately $ 322.27 and lawfully paid by respondent in the original bill and complainant in the cross-bill, the decree is reversed, and the cause is remanded for proper calculations of the amounts of due redemption charges and interest.”