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Tax Sales Traps
1. General Information While any myriad of problems may arise in the arena of tax sale property, the following list of actual traps may be instructive to a potential purchaser concerning when, if at all, to proceed to purchase property at a tax sale in Georgia. As purchaser you do not have any possessory rights to the property until you foreclose the right of redemption. That is, you can not build upon or go upon the land without the Owner/former Owner at tax sales express permission. 2. If the Former Owner wants to Fight, be prepared for the Fight. It ain’t over till its over. Myers v. North Georgia Title
and Tax Free Exchange On January 30, 1997, the IRS seized the property for Myers non-payment of IRS taxes. North Georgia bought the property for $146,000.00 at an auction held on April 8, 1997 by the IRS. The IRS issued North Georgia a certificate of sale on April 15, 1997. On October 7, 1997, after the expiration of the statutory 180-day redemption period (this is a Federal and not a State of Georgia period), the IRS issued North Georgia a quitclaim deed to the property. North Georgia filed a dispossessory action in the Gwinnett County Magistrate Court on December 14, 1997. On June 19, 1998, Myers brought the instant action entitled "Complaint for Quiet Title and Damages" in Gwinnett County Superior Court. A review of the Complaint reveals that Myers sought to litigate "whether the federal tax sale was valid and effective" and whether North Georgia had a right to take his property. While the Magistrate Court ruled for North Georgia, Myers was able to get back into Court and challenge North Georgia’s title. The Court of Appeals held that Res judicata did not preclude homeowner from suing tax sale purchaser to challenge validity of purchaser's title to homeowner's home, despite purchaser's prior dispossessory proceeding in magistrate court against homeowner, which purchaser brought after it acquired quit claim deed to homeowner's property; purchaser's dispossessory action was against homeowner as tenant at sufferance, and homeowner thus could not dispute purchaser's title in that proceeding. O.C.G.A. §§ 9-12-40, 44-7-9. Because Myers could not raise the issue of good title in the dispossessory proceeding, he was, therefor, allowed to raise it in a separate and independent suit after the Magistrate Suit. So, how is this ruling applicable to tax sales? All of these legal concepts are well settled. However, notice here that North Georgia paid the IRS, $146,000 in cold hard cash in April of 1997. It has been almost three years and North Georgia has not had access to its money (the 146K) nor the ability to convey good and marketable title to the property it purchased at the IRS tax sale. If we assume that investors could have made at least 6% on their money per year, and if we assume that North Georgia incurred about $10,000 in legal fees (that is my guess based on the amount of work they endured in the Court of Appeals and Trial Court), then North Georgia presently has a negative return of $36,000 on its investment of $146,000 in cash. And, it ain’t over yet. 3. Unrecorded Security Deeds May Rain on Your Party. Freeman, et al. v. Eastern Savings Bank, 271 Ga. 439, 520 S.E.2d 902 (1999). Freeman purchased property at a Cobb County tax sale. Eventhough Eastern Savings deed to secure debt (DSD) was not in the recorded chain of title (and thus was unknown to Freeman at the time of the purchase of the tax deed), Freeman learned of them/it later. Freeman gave notice of the right to foreclose the right to redeem to Eastern Saving. And, on the last day of the redemption period, Eastern Savings timely tendered an amount adequate to redeem the property. Freeman rejected the tender because Eastern Savings was not of record. Litigation ensued. [Notice that Freeman could have been made whole by accepting the tender; however, for reason not disclosed in the record he chose not to.] Freeman conveyed his title to an alleged BFP. That transaction was set aside by the Supreme Court. The Supreme Court held that Eastern Savings’ DSD did not have to be recorded in Georgia to be a valid lien on the property. "There is no requirement in OCGA § 48-4-40 that a party's valid interest in property must be recorded in the county's deed books before the party is entitled to redeem the property. Lack of such recordation affects only the notification duties imposed on the holder of the tax deed. See OCGA § 48-4-45(a)(1)(C)." Eastern Savings was granted the right to redeem the property. So, what can we learn from this case with regard to Georgia Tax Sales? It ain’t over till the Right to Redeem is extinguished! Regardless of what your title search says about the title of the land, any valid unrecorded DSD may appear and redeem within the statuory period. 4. Seizure of Real Property Must be Followed to the Letter or Will be Set Aside. In Blizzard v. Moniz, 271 Ga. 50, 518 S.E.2d 407 (1999), the Georgia Supreme Court set aside a tax deed title based on the failure of the tax purchasers to follow every tiny technicality of the foreclosure tax deed properly. The purchasers failed to adequately notice each and every one of the 8 tenants in common and thus, eventually had their tax title set aside. However, they were not helped much by the fact that the Sheriff was incapable of publishing the correct legal description on the property. "The enforcement and collection of taxes through the sale of the taxpayer's property has been regarded as a harsh procedure, and, therefore, the policy has been to favor the rights of the property owner in the interpretation of such laws; since the policy has been to favor the property owner, provisions permitting the owner to redeem his property are liberally construed to accomplish their objectives." 5. A Tax Sale Will Not extinguish valid easements across the Property. Eagle Glen Unit Owner Association, Inc. v. Lee, 237 Ga.App. 240, 514 S.E.2d 40 (1999) 6. Truly Stupid Things Can Happen in the realm of Tax Sales that even the Most Astute Lawyers Cannot Protect Against. In West v. Fulton County, 267 Ga. 456, 479 S.E.2d 722(1999), a purchaser bought property at a tax sale in 1982. The land was eventually taken away from the Purchaser by the Supreme Court upon the finding that Fulton County had no statutory authority to sell the land at tax sale. In 1980 Fulton County purchased the land, but apparently did not record its deed. In 1981, the Fulton County Tax Commissioner, apparently unaware that another branch of Fulton County purchased the property for the County, sold the property at public outcry for the prior owners nonpayment of 1979, 1980 and 1981 back taxes. The purchaser property recorded the tax deed that the Fulton Tax Commissioner sold him and property brought an action to foreclose the right of redemption against the former owner who had not paid taxes. Since by mid-1995 Fulton County finally figured out it owned the property, it moved to have the tax owners tax title declared invalid. Fulton County won on the theory that the Tax Commissioner had no statutory authority to convey the title the County owned in fee in 1981. What does this case teach us? Thousands of lawyers cannot protect ones legal interests against the continuing incompetence exhibited by Fulton County, Georgia. Notice: Disclaimer of Attorney Client Relationship by mere use of this website. The mere reading or accessing this website does not create an attorney client relationship. Emailing the firm or using the legal forms posted does not constitute and create an attorney client relationship. If you would like to inquire about possible legal representation, please be aware that we cannot represent you until we know that doing so will not create a conflict of interest for you or our present clients. 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