How to foreclose when only own 90% of tax lien-aquired property?

Question

We bought a tax lien property in Louisiana and now own 90% on the title.  How do we foreclose to get ownership the remaining 10%?  We're not sure what to do since the 10% owner died more that 30 years ago.

Erik W. · Answer

Tax lien laws are very state specific, and often time even the County Collector or whomever is in charge of the auction and foreclosure process aren't very well versed in how it's supposed to be done and make up their own rules.  So all that to say I agree you need an attorney who specializes in the laws of YOUR state.  Yes, it's going to cost.  I did tax liens for about 3 years and every hour of attorney time ran about $200.

I don't know how you got 90% of the title, but I assume the other 10% would be acquired the same way.  Did you purchase a 90% ownership stake and only bought a lien on the remaining 10%?

In my state, the lien is purchased and the owner has 1 year to redeem (pay back) all the taxes and fees owed, plus interest.  If they fail, then I send the Collector a packet showing I followed all the laws for notices and am not owing any delinquent taxes myself.  Once they receive that, I get a Collector's Deed that extinguishes the former owner's claim to title.  The downside is because the laws are somewhat vague, no title insurance company will issue a policy on that property until I do a Quiet Title action, which costs about another $2,000 on top of the whole tax lien process.

The people I have met who make money in tax lien investing become experts in their state's laws and procedures and know their local Collectors on a first name basis.  They also buy 20+ liens per auction because they know only 1-2 properties out of the batch will be worthwhile once they get the title. You make your money getting title, not interest on funds paid, which is usually not worth the time it takes to scout the property and wait for it.  Some states issue title right away, so those probably work better.

Anyway....good luck!

Albert Stancato · Answer

To own property allows Quiet Enjoyment. As in "Tenants In Common", you can own a percentage of a property and are allowed to sell or will it to others. In the state of Indiana, you have 0% rights and 0% ownership from a tax certificate... Only the right to petition the County Court after one year of non-payment for a tax deed. The tax deed must then be converted to an insurable deed by way of Quiet Title, or a Tax Certification from a title company.

Mary Danna · Answer

@J Johnson

You need to file a petition to quiet title if you haven't already and there are quite a few notice requirements that must be met. There are other steps afterwards to acquire the 10%, and when you go to sell for the next 10 yrs the title insurance with cost about 10x as much as normal, but all doable.

Do you know a good attorney for this? I have a some excellent recommendations in Louisiana if you need them. A client of mine just did this exact same thing.

Will Sifert · Answer

In Louisiana I don't believe there is a minimum % as long as you are an owner (even 1%) you can't be forced to be a co owner. If the other owners don't want to buy you out, and it can't be worked out we have a lawsuit that can force the sale of the property (or for the property to be divided up by % but that is rarely possible.) Then the proceeds from the sale is divided up by % of ownership. This most commonly happens in inheritances.

Will Sifert · Answer

Your client must have insured with US National, I have used them in the past and had to pay a high amount for title insurance. There are other options, depending on the situation. Other title insurance companies will write on tax lien properties if you can provide the pre tax sale notice. This is the certified mail that is sent to the owner before the tax sale. Most parishes are good at keeping those records but at most maybe 1/2 of those green cards end up getting signatures. Another option is to get the original owner to sign a quit claim AFTER the suit to quiet title. Usually you can offer the previous owner some money to sign it, if you can find them.

When he goes through his suit to quiet title unless he can find and serve the heirs to the property the court will have to appoint an ad hoc curator to try to locate and represent the interest of the heirs. If he can find them they will likely have some lack of noticing claims and depending on the value of the property and if they want to hire an attorney, they could sue to annual the tax sale.

In this situation title insurance wont matter because he is just part owner (90%)... unless he can locate and work out a deal with the heirs, his only option will be to do a suit to partition by licitation if he is successful with his suit to confirm the tax sale and quiet title.

Will Sifert · Answer

This happens in Louisiana a lot more often now that tax lien sales have gone online. In Louisiana you bid down by percentage of ownership of the property, that is if it doesn't get redeemed. If it gets redeemed than the % you bid is irrelevant. Most states bid down by interest rate or bid up by premium or some variation of that.  Iowa and Louisiana are the only two states that I know of that bid down the % of ownership you are willing to take in the property... if it doesn't get redeemed. It starts at 100% and is bid down  to 1%.

So you bid 90%, has it been 3 years since the date you bought the tax lien?  We have a 3 year redemption period.  If it has, then you would need to hire an attorney to start a lawsuit to confirm your tax sale and quiet the title. If you owned 100% that is all he would have to do but since you are part owners with someone else the attorney would also have to file a suit to do partition by licitation.   Basically you confirm your tax sale, take ownership of 90% of the property then with the partition suit the judge will force a sale of the property and the proceeds will be split up based on percentage. So you would get 90% of what ever it sold for. I believe you get back what you paid in taxes off the top and reasonable attorney fees, but not 100% sure on that part.

Kent Braaksma · Answer

This same situation is happening in Iowa. Being a bid-down of ownership state, a lot of the tax liens purchased on-line are selling for 1% ownership. I have no idea how this would play out if you had to actually foreclose on a tax lien, and haven't had a chance to talk to the legals about it yet. My assumption is that at 51% ownership, you should be able to force the sale of the property. I don't know what could be done at less than 51% ownership.

Dave Fellow · Answer

@Mary Danna - Thanks!  That's the answer that I was looking.  Can you message those attorneys to me?  Thanks again

Ed Tamayo · Answer

@J Johnson

You bought a tax lien and now you have a title on 90% of the property.

Usually there would be a process that takes years between acquiring a tax lien and actually taking title of the property but it does sound like you do have a deed for 90%

If you have title to 90% of a property, you can’t “foreclose” on the other 10%.

You will have to acquire it from the heirs of the deceased owner.

You will have to start by searching for a probate for the owner of the 10%. If not probate found you will have to track down the heirs.

Also, if nobody is claiming the 10% now, you could occupy the property and X years  down the road (depending in which state is the property ). You could take title of the 10% by something called “adverse possession”. This is a much dicey route and would need legal help

How to foreclose when only own 90% of tax lien-aquired property?

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