Alabama Tax Sales and Improvement Payment

[Denise Evans]

This question came up yesterday, and I thought other people might have the same concern. As a result, I am sharing it here. After a tax certificate sale in Alabama, the investor is entitled to possession and in some circumstances can make improvements to the property. If there is a redemption during the certificate or the tax deed period, the redeeming party must pay for the value of the improvements, in addition to taxes and interest. (The rules for Alabama tax lien sales are different.)

The question was, "If the taxpayer indicates they want to redeem, must the investor stop all improvement activity? If so, for how long? At what point has the taxpayer had enough time to redeem and the investor is allowed to continue with its improvements?"

There is no clear line, safe-harbor, answer. There is no statute. There is no appellate authority in the tax sales context. The best advice I can offer you is to stop everything when there is a redemption request. Provide the taxpayer, in writing, with your statement of lawful charges for improvements you have already made, and insurance. In that same writing, tell the taxpayer they have ten calendar days to tender payment or you will proceed with improvements and the redemption cost will continue to increase.

If they start the official dispute process by appointing a referee, you will have to wait until the end of that process, and then send a new notice with a new ten day deadline. The referee process takes around 30 days.

The important word here is "tender." That is a legal word that means the taxpayer has made the offer to pay and has the funds to back it up. To be effective, tender requires readiness, willingness, and a present ability to pay. (Alabama Water Co. v. Anniston, 227 Ala. 579, 151 So. 457 (1933)) If a taxpayer does not tender payment within the redemption deadlines, then it no longer has the right to redeem. (Kimble v. Fowler, 222 Ala. 178, 131 So. 440 (1930)) This has been upheld in the area of foreclosure redemptions. (Durr Drug Co. v. Acree, 241 Ala. 391, 2 So.2d 903 (1941))

So, just SAYING someone wants to redeem is legally meaningless if they do not actually have the money at that time or have the present ability to get it easily and almost immediately.

When receiving a redemption request that stops improvement work, you might want to task for proof of funds for at least the taxes, interest, and insurance. Those items cannot be legally disputed. Without that proof of funds, there was never really a tender.

Bottom line, if the taxpayer misses the deadline and later argues you should have given them longer to redeem, you should fight back by saying they never made a legal tender and your grace period was only a courtesy. Using a word like "tender" pretty much sends a message you know what you are talking about, but you might want to reinforce that by quoting the language from my book. That way, if the taxpayer goes to a lawyer and gives that person your letter, the lawyer will know it is probably a lost cause and decline to represent them.