Alabama Tax Sale Warning

Just a reminder to be very careful if you plan to invest in Alabama tax sale properties this Spring.  The recent case of Mitchell v. Curry (Alabama Court of Civil Appeals, September 10, 2010) could cost you tens of thousands of dollars.  Mitchell lost his property at a tax sale in 2004. There were no bidders, so the property went to the State. Curry purchased from the State, and received a tax deed in 2007.

Curry made improvements, paid insurance premiums, and put a tenant in the property and collected rents.

In 2008, Mitchell filed a lawsuit asking for the right to redeem. He claimed he did not receive proper notice of the sale from the state to Curry.  The court agreed, and held the tax sale was void.  The court also decided that because the tax sale was void, Curry was not entitled to keep the rents he collected in the meantime.  Mitchell was allowed to redeem by paying the taxes due from 2004 to the present, plus costs of improvements and insurance premiums.

BUT, Curry had to pay Mitchell the rents he’d collected, approximately $16,000!

As a procedural note, Mitchell claimed Curry had collected over $16,000 in rents.  Curry did not contest the amount, but simply his right to keep the rents. After Curry lost on the issue of whether he had to pay the rents over to Mitchell, he THEN alleged that he’d collected only $6,000. The court said Curry raised that issue too late, and he was stuck with the $16,000 figure.

Read the entire decision HERE.  When targeting tax sale purchases, make sure the newspaper notices for that property were accurate. Also check to see if the person on the tax sale advertisement is still the owner of the property. An intervening sale, or foreclosure, could make the tax sale void.  If buying from the State of Alabama, make sure that last notice was in fact sent, to the proper address.  If you don’t engage in this due diligence, there could be seriously bad consequences for you.