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Tax Lien Rights
Hi everyone im new to tax lien investing and had a question about a lien i purchased this year. I purchased about 2 acres of land in Winston County Al I went and looked at the property and its all completely wooded, but my question is could i go ahead and start clearing the timber off of it or should i wait until the redemption period is over with first? Ive heard both from numerous different people but would like an opinion from someone more experienced, thanks!
If you in fact purchased a tax lien under the new system (people bid down the interest rate) then you are not allowed to set foot on the property and you certainly cannot cut the timber until after a judge forecloses your liens, quiets title, and orders the clerk to issue a deed to you. That is, at a minimum, 4 years in the future. You must file the lawsuit and then you must obtain the order.
If you purchased a tax certificate under the old system (people bid up the purchase price) you are not allowed to cut the timber while you have only a tax certificate, which is the time period up to three years after the auction. There is no appellate or statutory authority that allows to you cut the timber after the tax deed date, but while judicial redemption rights might still be outstanding. I personally think you can, and if the former owner redeems, they get cutover timber land. But, a court could rule differently.
Quote from @Denise Evans:
If you in fact purchased a tax lien under the new system (people bid down the interest rate) then you are not allowed to set foot on the property and you certainly cannot cut the timber until after a judge forecloses your liens, quiets title, and orders the clerk to issue a deed to you. That is, at a minimum, 4 years in the future. You must file the lawsuit and then you must obtain the order.
If you purchased a tax certificate under the old system (people bid up the purchase price) you are not allowed to cut the timber while you have only a tax certificate, which is the time period up to three years after the auction. There is no appellate or statutory authority that allows to you cut the timber after the tax deed date, but while judicial redemption rights might still be outstanding. I personally think you can, and if the former owner redeems, they get cutover timber land. But, a court could rule differently.
Thank you so much for the info i appreciate it!
You are welcome:)
Was this a tax lien certificate or a tax deed? There is a big difference and you don't sound like you know which one it is. All states and counties are different, so you need to read through the county documents carefully and consult a local real estate lawyer.
Some counties will only sell the tax debt. If that is the case, you absolutely do not own the property, you can't trespass and you definitely can't cut trees down!
Some county's seize the property and then they actually auction off the property in a tax defaulted auction. Winning bids receive a quitclaim deed and then the bidder has to file the quitclaim deed with the county clerk to get title and officially own the property. Even after you have title, if there is a redemption period in that state, then you want to wait until the redemption period has passed before you make any costly repairs or upgrades. Just winning the bid and paying at the auction isn't the end of it. There are several things to do legally after that.
Every county and state is different as far as what they do with tax defaults, which is why you are getting different answers from different people. You need to go to that county's treasurer and county clerk website (or in person) and carefully read through all the information about how they handle tax defaulted properties.
Quote from @Kristine Ann:
Was this a tax lien certificate or a tax deed? There is a big difference and you don't sound like you know which one it is. All states and counties are different, so you need to read through the county documents carefully and consult a local real estate lawyer.
Some counties will only sell the tax debt. If that is the case, you absolutely do not own the property, you can't trespass and you definitely can't cut trees down!
Some county's seize the property and then they actually auction off the property in a tax defaulted auction. Winning bids receive a quitclaim deed and then the bidder has to file the quitclaim deed with the county clerk to get title and officially own the property. Even after you have title, if there is a redemption period in that state, then you want to wait until the redemption period has passed before you make any costly repairs or upgrades. Just winning the bid and paying at the auction isn't the end of it. There are several things to do legally after that.Every county and state is different as far as what they do with tax defaults, so you can't go by what a random person says. You need to go to that county's treasurer and county clerk website (or in person) and carefully read through all the information about how they handle tax defaulted properties.
It is a tax lien certificate but thanks for the info!
Quote from @Denise Evans:
If you in fact purchased a tax lien under the new system (people bid down the interest rate) then you are not allowed to set foot on the property and you certainly cannot cut the timber until after a judge forecloses your liens, quiets title, and orders the clerk to issue a deed to you. That is, at a minimum, 4 years in the future. You must file the lawsuit and then you must obtain the order.
If you purchased a tax certificate under the old system (people bid up the purchase price) you are not allowed to cut the timber while you have only a tax certificate, which is the time period up to three years after the auction. There is no appellate or statutory authority that allows to you cut the timber after the tax deed date, but while judicial redemption rights might still be outstanding. I personally think you can, and if the former owner redeems, they get cutover timber land. But, a court could rule differently.
Denise, Its been a couple years since I was paying attention to what was happening in AL. Are some counties still on the old way and some on the new or have they all switched over? If I remember the "new" system it was much like how LA does it (Sell tax lien, 3 year redemption period, once redemption period expires file suit to quiet title and get a judgement.) I just found out that LA will be changing its system to something similar to what Florida does. We will still have liens but if the property doesn't redeem it is then sold off to the highest bidder. Colorado changed from selling liens and issuing deeds to selling liens and then auctioning off deeds as well. I wonder if AL will be changing again in the future. It seems tyler vs hennepin county is making some waves.
A few Alabama counties are still on the old system. They are some of the rural counties plus Lee County (Auburn University) and Houston County (Dothan--VERY large agribusiness area). Alabama has already changed in response to Tyler v. Hennepin County, for the new system. Now, if someone has redemption rights they can demand a public auction at conclusion of the lien foreclosure lawsuit. If it brings enough to cover taxes, interest, legal fees and auction expenses, plus some extra, the people with redemption rights share the "extra." If nobody demands a public auction, the tax sale investor gets the property, free and clear.
@Kristine Ann, even under the "older" system in Alabama, winning bidders do not get a quitclaim deed. They get a tax certificate and ONE of the "sticks" in the "bundle of rights" that belongs to the owner. The winning bidder gets the right to possession, but usually cannot exercise DIY possession. Instead, it usually requires voluntary surrender by the owner, or a successful ejectment lawsuit suit. Three years later the investor will surrender their certificate to the Probate Judge, pay a $5 fee, and obtain a tax deed. Even after that, there might still be redemption rights in former owners (or heirs) and lien holders.
PS--DO NOT ask county personnel for legal advice. They are not allowed to give it. Often they do it anyway, but are usually wrong. Rely on industry acknowledged experts for advice. In Alabama, the rules are complicated and subtle.
@Grant Jordan Ward
Your post (potentially) contemplates criminal trespass and felony theft. Stay off the property until you own it!
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Quote from @Edward Condon:I havent been on the property ive just rode by and looked at it was just curious how it worked since ive heard multiple people say different things
@Grant Jordan Ward
Your post (potentially) contemplates criminal trespass and felony theft. Stay off the property until you own it!
Quote from @Denise Evans:
@Kristine Ann, even under the "older" system in Alabama, winning bidders do not get a quitclaim deed. They get a tax certificate and ONE of the "sticks" in the "bundle of rights" that belongs to the owner. The winning bidder gets the right to possession, but usually cannot exercise DIY possession. Instead, it usually requires voluntary surrender by the owner, or a successful ejectment lawsuit suit. Three years later the investor will surrender their certificate to the Probate Judge, pay a $5 fee, and obtain a tax deed. Even after that, there might still be redemption rights in former owners (or heirs) and lien holders.
PS--DO NOT ask county personnel for legal advice. They are not allowed to give it. Often they do it anyway, but are usually wrong. Rely on industry acknowledged experts for advice. In Alabama, the rules are complicated and subtl
Hi @Denise Evans If I don't turn in my tax certificate for the tax deed after the three year period is up is my certificate voided? What if annual tax payments were made to keep it from going back to auction?
If you don't turn in your certificate and get a deed, the law assumes you have ownership, but it's not completely clear-cut. You can continue making the annual payments and preserve your interest. It is best to get the deed, though. The fee is only $5. Then for sure you are the owner and there is no dispute with insurance companies if you suffer a loss. If for some reason you need to rely on regular adverse possession instead of tax sale short statute of limitations, it requires ten years of possession after color of title. That tax deed is your color of title. Also, if you have to go to court for some reason and you have a tax deed, the probate judge's signature is prima facie evidence the tax sale was done correctly. Someone can dispute that and then you'll have to prove it, but usually nobody disputes it. But, if all you have is a tax certificate, you MUST prove the tax sale was done properly, even if the other side does not raise that issue. That is only if you are in court, though.
Got it, thx!!