Bulletin: MD2008005

Date:
September 29, 2008
To:
All Maryland Issuing Offices
RE:
Insuring out of Tax Sales and Sherriff Sales in Maryland

Dear Associates:

Stewart Title Guaranty Company (STGC) has recently seen an increase in tax sale and sheriff sale foreclosure issues. As a general rule, STGC will not approve the issuance of title insurance resulting from a tax sale or sheriff's sale without STGC State Counsel review and approval. All issuing agents transacting business in Maryland must follow the below guidelines and submit such required information to State Counsel prior to issuing title insurance commitments or policies.

The three main areas of concern are (in order of priority):

A.) Timing;
B.) Notice; and
C.) Procedure.

A. Timing:

All agents must diligently investigate the facts and specific circumstances surrounding tax sale and sheriff sale foreclosures, including knowing who the buyers are, who the foreclosing attorneys are, making sure all parties were adequately notified and the title has been "seasoned." Seasoning applies to the minimum one (1) year holding period of the tax sale certificate purchaser from the date of the recording of the deed from the taxing authority or the sheriff as further exemplified in the following statute:

Maryland Annotated Code, Tax Property Article, §14-845(a): Reopening judgments generally.- A court in the State may not reopen a judgment rendered in a tax sale foreclosure proceeding except on the ground of lack of jurisdiction or fraud in the conduct of the proceedings to foreclose; however, no reopening of any judgment on the ground of constructive fraud in the conduct of the proceedings to foreclose shall be entertained by any court unless an application to reopen a judgment rendered is filed within 1 year from the date of the judgment.

B. Notice:

The new foreclosure statute (2008) requires that personal service be conducted on ALL defendants including the owner.

Md. REAL PROPERTY Code Ann. § 7-105.1 (2008) Residential property foreclosure procedure:

*  *  *

(e) Service. --

(1) A copy of the order to docket or complaint to foreclose on residential property and all other papers filed with it shall be served by:
(i) Personal delivery of the papers to the mortgagor or grantor; or
(ii) Leaving the papers with a resident of suitable age and discretion at the mortgagor's or grantor's dwelling house or usual place of abode.

(2) If at least two good faith efforts to serve the mortgagor or grantor under paragraph (1) of this subsection on different days have not succeeded, the plaintiff may effect service by:
(i) Filing an affidavit with the court describing the good faith efforts to serve the mortgagor or grantor; and
(ii) 1. Mailing a copy of the order to docket or complaint to foreclose and all other papers filed with it by certified mail, return receipt requested, and first-class mail to the mortgagor's or grantor's last known address and, if different, to the address of the residential property subject to the mortgage or deed of trust; and
2. Posting a copy of the order to docket or complaint to foreclose and all other papers filed with it in a conspicuous place on the residential property subject to the mortgage or deed of trust.

(3) The individual making service of process under this subsection shall file proof of service with the court in accordance with the Maryland Rules.

Md. TAX-PROPERTY Code Ann. § 14-839 (2008) Issuance of process

(a) Notice to defendants. --

(1) The plaintiff shall show in the title of the complaint the last address known to the plaintiff or to the attorney filing the complaint of each defendant, as obtained from:
(i) any records examined as part of the title examination;
(ii) the tax rolls of the collector who made the sale, as to the property described in the complaint; and
(iii) any other address that is known to the plaintiff or the attorney filing the complaint.

*  *  *

(5) Notice to a defendant may be made in any other manner that results in actual notice of the pendency of the action to the defendant. When notice is made under this paragraph it shall be certified to by an affidavit that fairly describes the method and time of service.

Moreover at a minimum, the following items need to be accomplished or considered when examining a tax sale title:

  • Whether the necessary parties have been named as defendants.

  • Whether said parties have been personally served. Service by publication will require the passage of 3 years with no suit brought to set aside the sale before the property may be safely insured.

  • Whether the proceedings and the sale have been consummated in strict compliance with the statutes.

  • Whether the inadequacy of the consideration may be a ground for a possible invalidation.

  • Whether the right of redemption has been exercised by any defendant, tenant or interested party.

  • Whether the time in which to exercise the right of redemption has expired.

  • Whether the decree of the Court is final and nonappealable.

  • Whether a proper tax deed has been executed and filed for record.

  • Whether the former owner has surrendered possession of the property.


C. Procedure:

Actions To Foreclose Rights of Redemption: • Certificate holder may file after the expiration of six months from the date of sale. • File a complaint in the Circuit Court to foreclose all rights of redemption. Must be filed within a two-year period subsequent to sale or the certificate is void (§ 14-833). One year in Baltimore City if property is vacant or abandoned or housing violation notice filed. • The certificate of sale must be attached and made a part of the complaint (§14-835). • The plaintiff must be the holder of the certificate of sale. • The defendants must be: • (a) record owner(s) of the property, (b) owner of ground rents, if applicable, (c) mortgage holders and trustees under any deed of trust, (d) the State of Maryland, and (e) the County (§14-836). • If the property, on which the tax lien sold, was subject to ground rent, the judgment vests a leasehold interest in the plaintiff (§14-844). • The final judgment of the Court will direct the Collector to execute a deed upon payment to the Collector, the balance of the purchase price, together with all taxes, interest, penalty and charges accruing subsequent to the sale. • The deed is to be prepared by the holder of the certificate of sale or an attorney. • The Collector is not obligated to execute the deed until the Clerk of the Court has furnished the Collector with a certified copy of the judgment. • If the holder of the certificate does not comply with the terms of the final judgment within 90 days, the judgment may be stricken by the Court upon the motion of an interested party (§14-847). • Once a judgment is granted, the plaintiff becomes liable for taxes due after the judgment and for any surplus bid (§ 14-844(d)). • Any person who acquires a deed to property under this subtitle is entitled to issuance of a writ for possession of the property under the Maryland Rules as if the person had obtained a judgment awarding possession of the property (§ 14-850). Possession not included with deed. Need writ.

§ 14-820 Form of certificate.- The certificate of sale shall be in substantially the following form:

"I, . . . . . . . . . . ., Collector of Taxes for the State of Maryland and the . . . . . . . . . . . of . . . . . ., certify that on . . . . . . . ., 20. . . ., I sold to . . . . . . . . . . ., at public auction for the sum of . . . . . . . . Dollars and . . . . . . Cents, of which . . . . . . . Dollars has been paid, the property in . . . . . . . . . . . described as . . . . . . . . . . . and assessed to . . . . . . . . . . . The property described in this certificate is subject to redemption. On redemption the holder of the certificate will be refunded the sums paid on account of the purchase price together with interest at the rate of 6% a year from the date of payment to the date of redemption (except as stated in subsection (b) of § 14-820 of the Tax - Property Article of the Annotated Code of Maryland), together with all other amounts specified by Chapter 761 of the Acts of 1943, and acts that amend that chapter. The balance due on account of the purchase price and all taxes, together with interest and penalties on the taxes, accruing after the date of sale, must be paid to the Collector before a deed can be delivered to the purchaser. After . . . . . . . . . . ., 20. . . . . . . ., a proceeding can be brought to foreclose all rights of redemption in the property. This certificate will be void unless such a proceeding is brought within 2 years from the date of this certificate, except that in Baltimore City, with respect to any abandoned property sold under § 14-817(c) of the Tax - Property Article of the Annotated Code of Maryland with a minimum bid less than the lien amount, the certificate will revert to the Mayor and City Council and will be void as to the private purchaser at tax sale unless such a proceeding is brought within 3 months from the date of the certificate.

Witness my hand and seal, this . . . . . . . day of . . . . . ., 20. . . . . .

....................
Collector"


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References

Bulletins Replaced:
None
Related Bulletins:
None
Underwriting Manual:
None
Exceptions Manual:
None
Forms:
None