How to Quiet Title with Tax Deed

[Tim White]

Hello,

I am currently under contract for a property that was purchased at a tax auction here in  Huntsville, AL.  That company failed to pay taxes on the property and it was then auctioned off again in 2012.  The current owners have had the property for 5 years and have obtained the tax deed for the property since the period of redemption passed in 2015.  I had a title report done on the proper and my attorney told me that I would not be able to obtain marketable title due the owner's only issuing a quit claim deed.  For this reason they did not give me a owner title insurance policy.   My plan is to keep the house as a rental long term but I would probably want to refinance it one day.

With all that being said, my question is has anyone had experience with perfecting a title after a tax sale?  If I could contact the previous owners and they release their interests in the property wouldn't that suffice for curing any encumbrances?

[Ned Carey]

@Tim White I do not know AL law so take this with a grain of salt

First it should NOT make a difference if they gave you a quit claim deed as far as title insurance goes. If the previous owner had clear title a quit claim deed passes clear title to you.  I would talk to another title company.  My guess is that title company simply didn't want to take the risk OR they didn't communicate exactly the situation.  A quit claim deed can convey insurable title. 

First they already have released their interest via the quit claim deed. If you are referring to the owners previous to that then a quit claim deed from them may but not necessarily help. If a third party has an interest due to a lien, mortgage or judgement, a prior owner can't release that secondary interest.

You can do what is know as a "Quiet title" action. Basically everyone in the chain of title or interest in the property is served and must make a claim to preserve any interest they might have.  An attorney would have to handle this for you.

Edit: added the word Not at the beginning of the second paragraph.