Tax Deed Alabama Investing

[Ralfie Doe]

I bought a Tax Deed this year from tax sale in 2014. The owner Quit Claim it to a company in 2018. But the former owner still owe taxes on it before it was sold to the state. So who is the new owner? How do I take peaceful possession? What’s the first thing to do after receiving the deed? 

[Denise Evans]

@Ralfie Doe, @Tai Bhattad, the quitclaim grantee (the company) is the owner of the redemption rights and all other rights. You should contact them to see if they will execute a quitclaim deed to you.  If not, file an ejectment lawsuit.  You have the following risks with this property:

(1) Based on Equivest v. Stiff, recent Supreme Court decision, the company might be able to claim the tax sale was void, but they still  have to pay you for taxes plus interest if they redeem. If you file for ejectment and are able to get a default judgment, and then make improvements, they might later be able to assert the tax sale was void and not pay you anything for the improvements. Whether or not they can do that even after your ejectment lawsuit is a tactical consideration you should discuss with an attorney. Make sure any attorney you hire has proof of malpractice insurance. These issues involving technicalities of civil procedure and issue preclusion can be tricky.  You either know them or you don't. If an attorney gives you advice that is clearly wrong, you'd like to know they have malpractice insurance in case you need to make a claim.  You should never be embarrassed about asking for proof of malpractice insurance. They either have it or they don't. The ones who do have it understand that is just prudent business for you to ask for it before hiring them. The ones who don't have it get all huffy and defensive.

(2) Based on Rioprop v. BBVA Compass Bank (Alabama Court of Civil Appeals) as interpreted in the DDNK v. Needham decision (Circuit Court of Jefferson County and not binding on any other courts, but still provides insight into how judges think about these things), the failure to obtain possession within 3 years of the tax deed date is fatal, and means the former owner (the company) can get the property back and not pay you anything at all.  That is the decision in Rioprop. the DDNK decision expanded that, and said the tax deed date of three years after the tax sale applies to the State also. So, according to DDNK, if it's been more than six years since the auction, even if it was on the state inventory most of that time, the former owner (the company, in your case) can get it back and pay you nothing at all.

(3) Based on lots of Alabama Supreme Court decisions going back one hundred years all the way to the present, if the first owner's name (the individual) was on the tax notices and called off at the auction, but the company was the true owner by the time of the auction, then the tax sale was void. Same consequences as #1 above. The only exception is Jefferson County, that has a special law, passed in 1936, that protects it against a tax sale being void if the wrong name was used at auction.

(4) Many people recommend just barging in and changing the locks to take possession. That is legally very dangerous. Property that appears "abandoned" might be merely vacant for a long time and in bad shape. I have some YouTube videos that explain the difference, and the consequences if you guess wrong about a property being abandoned. Be sure to watch those.

Tai, I included you on this answer because you are a very good student of tax sale issues, and give other people good advice on Bigger Pockets.  If you did not already know the things above, I know you want to be aware of them and continue to give out your excellent advice.