Do existing mortgages get removed from a property that is sold at a tax deed sale in California?
TLDR: All my research seems to indicate that an existing mortgage would be removed. However, I asked Chat GPT this question and it told me 'No'
Obligatory apology for the long post but I felt the details were particularly important to understanding the context and nature of my confusion.
Multiple counties reference section 3712 of the CA Revenue and Taxation Code to state that "The deed conveys title to the purchaser free from all
encumbrances of any kind existing before the sale, except..." and then goes on to list multiple exceptions that appear to all be related to governmental and/or taxing authorities but I don't see anything that seems to imply anything about mortgages being included as an exception.
Additionally, Ted Thomas' page (https://tedthomas.com/is-calif...) states "IS CALIFORNIA A TAX DEED STATE? – A MORTGAGE-FREE-PROPERTY" and "When the auction takes place, the county treasurer has the authority given by the state of California legislature to wipe out, that is, delete, completely extinguish the mortgage loan on the property."
HOWEVER... when I asked the new oracle in town, namely Chat GPT, "Do California tax deed sales eliminate an existing mortgage?", it told me "No, a tax deed sale in California does not eliminate an existing mortgage. A tax deed sale conveys ownership of a property to the highest bidder at a public auction, but it does not eliminate any liens or encumbrances on the property, including mortgages. The new owner of a property acquired through a tax deed sale may still be responsible for paying off any outstanding mortgages or other debts associated with the property."
A bit taken aback, I then asked "Can you provide your evidence as to why you believe california tax deed auctions do not eliminate an existing mortgage?" and it replied "Yes, I can provide evidence to support my statement that California tax deed auctions do not eliminate an existing mortgage. This information is based on California state law and legal precedent.
According to California Code of Civil Procedure Section 3691, a tax sale only conveys a tax collector's interest in the property, not any other interest in the property. This means that a tax sale only transfers ownership of the property to the extent of the state's interest, and it does not affect any other interests in the property, including mortgages.
Furthermore, in California, the priority of liens and encumbrances on a property, such as mortgages, remains intact after a tax sale. This means that a mortgage that was recorded before a tax sale will still be in place after the tax sale, and the mortgage holder can still enforce their rights under the mortgage.
This information is supported by legal precedent, including case law from California courts, which have consistently held that a tax sale does not eliminate an existing mortgage.
In summary, the evidence supports my statement that a tax deed sale in California does not eliminate an existing mortgage, as it only conveys the tax collector's interest in the property and does not affect the priority of other liens or encumbrances on the property."
Still in disbelief, I asked "does california law section 3712 indicate that a mortgage would be cleared from a tax defaulted tax deed auction sale?" and it replied "No, California law section 3712 does not indicate that a mortgage would be cleared from a tax defaulted tax deed auction sale.
California Civil Code Section 3712 governs the procedures for conducting tax defaulted property sales, but it does not mention that a mortgage would be cleared as a result of a tax defaulted tax deed auction sale. In fact, California law provides that tax defaulted property sales do not extinguish liens or encumbrances on the property, including mortgages, unless the liens are specifically purchased at the sale.
Therefore, a mortgage would remain in place even after a tax defaulted tax deed auction sale in California, unless the mortgage was specifically purchased at the sale by the winning bidder. The new owner of the property would still be responsible for paying off any outstanding mortgages or other debts associated with the property."
I understand that Chat GPT is an Artificial Intelligence and its responses may not be accurate. Perhaps I'm not phrasing my question correctly? Or perhaps my understanding of tax deed auctions is flawed. Can anyone confirm whether or not an existing mortgage on a property would be extinguished through a tax deed auction sale? And can you provide your evidence as well? Maybe you could help me improve the phrasing of my questions to Chat GPT to get the correct response.
If you've made it this far, I thank you for your interest and maybe you're as curious as me to see where this goes. :-)
