19.00 Tax Titles

19.00.1

In General

A "tax sale" is the most common remedy provided by local law for the collection of unpaid real estate taxes. Such a sale may be either a ministerial sale or a judicial sale.

Ministerial Sale

Most states' statutes provide summary methods for the sale of property due to unpaid taxes. Certain officers are authorized to advertise the property for sale and sell it after a period of delinquency. These sales are known as ministerial sales and are conducted outside the scope of judicial proceedings. In some jurisdictions, the constitutionality of ministerial sales has been under attack on the grounds that the form of notice violates the due process clause of the U.S. Constitution. Ministerial sales are regulated wholly by statute. Company policy requires senior counsel approval prior to issuance of a policy when title is derived from a sale based only on notice by advertisement.

Judicial Sale

In some states, constitutional or statutory provisions prohibit the sale of land for the payment of delinquent taxes through the exercise of any summary, administrative or non-judicial proceedings. These states have established special judicial proceedings to foreclose for delinquent taxes and to authorize the subsequent tax sales. These proceedings are of two kinds:

  • An action in personam, this is, a suit against the person who owes the taxes. In this type of action, jurisdiction over the tax debtor must be acquired, and when rendered, the judgment may be enforced by execution as any other judgment.

  • An action in rem, is a suit against the property subject to the payment of the delinquent taxes. It does not involve any personal judgment against the owner. On occasions, the only service is notice by publication. The tax deed given upon the sale stands upon the same footing as a sheriff's deed. The interests affected by the tax sale are determined by state law. Some actions in rem are being attacked on the basis that the due process clause of the 14th Amendment is violated by proceedings in which the only service is by publication and where no effort is made to provide personal service to the property owner. Company policy requires senior counsel approval prior to issuance of a policy when personal service of the taxpayer is not obtained.

19.00.2

Terminology

Redemption from Tax Sale

A procedure whereby a former owner, his successors in interest, or anyone having substantial interest in the premises, may obtain legal title as complete and as unqualified as it was before the tax assessed. Repayment within the statutory period of the amount the purchaser paid for the property plus interest and costs redeems the property from the tax sale.

Tax Certificate of Sale

A certificate which is issued to a purchaser of property at a tax sale by the public officer who conducts the sale. A tax certificate is evidence of the payment of the delinquent taxes plus interest, and of the holder's right to a deed to the property in the event that the property is not redeemed.

Tax Deed

A tax deed conveys title to property that was sold by the local or taxing authority for the nonpayment of taxes. The procedure leading to the sale of the property is set forth by statute. Generally the lien for unpaid taxes must remain unsatisfied for a specified period of time, proper notice must be given, the sale must be held at public auction and the defaulting taxpayer must be allowed a specified period of time to redeem the property by paying the purchase price plus the cost and interest.

Tax Rolls

Public records that show the taxable property, tax amounts, assessed valuations and other information.

Tax Sale

A sale of property where taxes levied against the property or against the owner of the property remain unpaid after a certain time. Generally, the owner is given a period of time after the sale to redeem his property.

Tax Title

Title to property acquired by a purchaser at a tax sale. The purchaser at the tax sale comes strictly within the rule caveat emptor. One who claims title to land by virtue of a tax sale is bound to show the existence of every fact necessary to give jurisdiction and authority to the officer who made the sale, and a strict compliance by that person with all things required by the statute in carrying out the sale.

19.00.3

Purchaser's Title Or Interest

The purchaser at a tax sale does not usually acquire title to the land until the execution of a tax deed in his favor. The purchaser's interest during the period of redemption is in the nature of a lien. The money value of the lien is determined by the amount required by local statute to effect a redemption.

In most states, after the termination of the statutory period of redemption, the interest acquired by the purchaser through a tax deed is an estate in fee simple. The tax deed is commonly regarded as a new source of title, springing from the sovereign, independent of the previous chain of title, and obliterating all prior liens and interest affecting the land.

In other states, a tax deed passes only the interest of the person assessed, and the tax deed grantee takes the property subject to all the existing liens and interests.

19.00.4

Rights Of Redemption Of Former Owner After Tax Sale

In almost all the states. the statutes provide that land sold for taxes may be redeemed. This statutory right of redemption exists for the benefit of the owner and any other person who has an interest in the property. The statutes fix the time in which the redemption may be made (usually from one to three years). In some states, the right may be exercised at any time before the delivery of the tax deed.

Usually the purchaser is given a certificate of sale at the time of the tax sale. This certificate does not pass title, but is evidence of the purchaser's inchoate title, and it recites when the holder will be entitled to a deed if the property is not redeemed. The statutes also usually provide that the rights of a purchaser under a certificate of sale may be assigned. In most states, until the period of redemption expires, the owner is entitled to possession of the land and to its profits. The holder of the certificate of sale is usually entitled to a deed on the expiration of the period of redemption, but in some states a foreclosure of the right of redemption is necessary. The tax deed, when issued, must contain all the elements required by the statute, and show by its recitals a complete performance of all that is required by law to make the sale lawful. There must also be a description of the lands sold. If any of these requirements are omitted, the deed may become voidable or void. In some states, the statutes prescribe the form of a tax deed, and in such states it is generally held that a substantial compliance with the statutory form will be sufficient.

19.00.5

Clearing The Title From The Effect Of A Tax Deed

If a judicial sale

A proper quitclaim deed, or its equivalent, duly executed by the grantee(s) of the tax deed or the last grantee must be filed for record.

If a non-judicial sale

Any of the following documents (or a certified copy) must be filed for record:

  • Discharge by redemption
  • Cancellation of the sale by decree of the court
  • Surrender and cancellation of the tax sale certificate by the purchaser or his assignee
  • Release by quitclaim deed or its equivalent

19.00.6

Insurance Of Tax Titles

No other proceedings requires such a thorough understanding of the relevant statutes as does proceedings based on a tax deed. There are no shortcuts or brief outlines to aid such an examination. The proceedings are entirely governed by statute and any deviation therefrom should be construed as a procedural defect and be specifically noted.

The following items need to be accomplished or considered when examining a tax title:

  • Fully research and understand all the pertinent statutory provisions
  • Determine whether the sale was ministerial or judicial
  • Determine that the Court had proper jurisdiction
  • Determine that the necessary parties were named as defendants
  • Determine that the said parties were personally served
  • Determine that the proceedings and the sale were consummated in strict compliance with the statutory dispositions
  • Consider whether inadequacy of consideration may be a ground for invalidation.
  • Determine that the right of redemption has not been exercised by any defendant.
  • Determine that the time in which to exercise the right of redemption has expired
  • Determine that the decree of the Court is final and non-appealable
  • Determine that a proper tax deed has been executed and filed for record
  • Determine that the former owner has surrendered possession of the property
  • Determine whether prior liens, encumbrances, easements and restrictions have been extinguished