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Here, the old adage that location, location, location is of paramount importance in choosing property is of secondary importance. Instead, in this case, PROPER NOTICE, PROPER NOTICE, PROPER NOTICE is without question the most important aspect in determining the validity of a tax deed. With that in mind, always remember that proper notice is a fundamental right afforded by our legal system and is an important part of "due process." Due process, as characterized by proper notice , may not be denied to anyone. Property owners of record, lien holders, creditors, heirs, mortgage holders and trustees, to name only a few, are called parties in interest. All parties in interest must be properly notified by publication, certified mail, and/or personal service by a representative of the sheriff. If parties in interest are not notified in strict accordance with state statutes, then one of two things may happen.
First, a tax certificate buyer may find that upon requesting the issuance of a tax deed, the taxing authority may refuse to issue the deed due to notification problems and may instead simply refund the original tax certificate amount without interest. The wholesale voiding of tax certificates happens more often than not. Unfortunately, you have absolutely no recourse against the taxing authority that did not give the proper notice. Yes, the law does state that you can go against their official bond. Well, just try that and see how far you get. Those are clear instances of caveat emptor, "let the buyer beware." Just learn from those events, chalk them up to experience, and move on.
Second, if the tax deed has already been issued, you may be forced to deal with a party in interest in an attempt to negotiate a re-conveyance of their interest back to them. If, however, you decide not to deal with them and choose instead to be greedy and hold out for some large settlement amount, you may very well find yourself defending against a costly and protracted lawsuit to set aside your tax deed.
I have been active in the tax sale industry for over 20 years. During that time, I would estimate that at least 98% of the legal actions that I have seen, involving tax deed disputes, centered mainly on improper notice. When out-of-court settlements were not reached in these cases, I can say that almost without exception, most of these tax deeds were either set aside, voided, or the redemption period was re-opened by a chancery judge.
A special note to keep in mind-many of my attorney friends and I share the same legal bias, which is that chancery judges, as a matter of practice, usually do not favor the loss of an individual's property rights through the issuance of a tax deed. Such courts most often tend to construe all statutes to the utmost advantage of the parties who have lost their interest due to delinquent taxes. My advice to you then would be, when faced with a potential challenge to one of your tax deeds, work diligently to craft a creative and mutually beneficial resolution to the matter. If at all possible, don't let the issue escalate into a lawsuit. In most cases the other side would much rather settle than have to take the matter to court.
In the unlikely event that a party in interest has, in fact, been afforded proper statutory notice, that party, at least in principal, loses their ability to reclaim any interest in the tax deed property. If no other parties in interest exist, or if they received proper notice, the tax deed holder may well hold a tax deed free from any claim(s) that said parties may have had prior to the tax deed issuance.
However, even if you can prove that proper notice was given, this does not bar a party in interest from filing a court action thus requiring you to launch a defense. If in fact you are taken to court, regardless of how good your notice is, your claim will most assuredly be closely scrutinized by a chancery court judge. So don't automatically think you have it in the bag. Regardless of how in the right you think you are, you will have an expensive and uphill battle.
Let me once again make a personal observation. Rare is a tax deed that could withstand extreme legal scrutiny. Does this mean that the validity of all tax deeds will be questioned? No, not at all. Quite the contrary, my experience has been that the validity of tax deeds is challenged in only a small percentage of cases. However, if your total tax deed holdings consist of only two or three tax deeds, and two are voided due to improper notice, I can assure you that your experience, as a percentage of your total tax deeds owned, will be much different than mine and probably unpleasant. In that event, it will mean little to you that my experience has been different. Based on the aforementioned, you can probably see why it might be in your best interest to do all of your homework before purchasing a tax deed.
In summary, every prudent tax deed purchaser must remain mindful that all parties having a legal and/or equitable interest in a tax deed property, including but not limited to property owners, mortgagees, lien holders, creditors, and heirs must be given proper statutory notice and may, at any time, initiate a cause of action to recover their interest. These parties are entitled to know that the property in which they hold an interest has not only been sold for taxes, but that a tax deed will be issued if the delinquent taxes are not redeemed before the expiration of the statutory redemption period.
Property inspections, when possible, and to the extent allowed by law, coupled with a title and notification search conducted by a qualified attorney may well provide you with the necessary information upon which to base further research and buying decisions. This type of fundamental due diligence is the key element to the tax deed research equation and should never be ignored.
So let's review. Successful tax deed buyers are those who, more often than not, properly research a tax deed before buying. By properly researching all the facts surrounding a tax deed property, these individuals are generally able to maximize their profits while minimizing their losses.
My gosh, you say, that kind of research could add up to a significant investment on my part before even considering the actual tax deed purchase price. That may very well be true; however, keep in mind that an informed purchaser almost always, over time, does better than a gambler. When making any type of acquisition, you should always do your homework. Research, research, research…that is to say the lack or presence of it, is often a leading indicator of how profitable or unprofitable one's tax deed purchase will be.
Let's review. Laziness, ignorance, and failure to research on the part of tax deed buyers can often be blamed for less than ideal tax deed buying experiences. Why? Well, human as we are, many of us simply are not willing to apply ourselves and do the necessary homework. Granted, one may, on occasion, get lucky by following a hunch, a rumor, or a shot in the dark here and there, but in the long run, it is only through patience, proper research, hard work, and perseverance that tax buyers become successful.
Unless you know what you are doing, throwing your money to the wind in the purchase of tax deeds in hopes of gaining big returns is misguided and potentially a good way to waste time and lose money or, at the very least, minimize your returns. So, if you only take one thing with you from this summary, it should be that if you are gambling on success, you would probably have more fun and possibly better odds visiting beautiful Biloxi, Mississippi, my home, and putting your dollars to work in the slot machines or on the tables in one of our many beautiful casino resorts.
Many an unlucky tax deed purchaser has discovered, much too late, that because a tax deed was not property researched, it has been subject to things such as state and federal tax liens, bankruptcy filings, unsatisfied mortgages, environmental and wetland problems, improper legal descriptions, heirship challenges, clean-up assessments and/or demolition liens, or suits to set aside tax deeds due to improper sale, double or improper assessments, improper descriptions, publication and/or notification inadequacies, to name only a few.
In the final analysis, although fundamental due diligence, prior to tax deed acquisition, property inspections and title searches does not guarantee a successful tax deed purchase, they certainly increase one's odds of building a quality base in tax deed property holding.
© American Public Realty, LLC-2001