What good is a tax deed?

You’ve heard me say this over and over again–the three year redemption “clock” does not truly start “ticking down” until the investor takes possession of the property. On the other hand, the investor can get a tax deed three years after the tax sale. Assuming there are still redemption rights outstanding (because of the possession issue) then what good is the tax deed?

Here is the answer:

Alabama Code Section 40-10-131 says you are entitled to cut the timber, remove permanent improvements, and commit waste after you receive the tax deed from the probate judge.  In other words, I think that if you harvest the timber after you receive a tax deed, and then the owner redeems, the owner does NOT get a credit for value of the timber that was cut.  If the investor cuts the timber before the tax deed, and the owner then redeems, the owner will be entitled to a credit.  No, don’t bother asking me “What if I cut the timber before the tax deed and the owner redeems after the tax deed?”  I don’t know.  Ask your attorney, and make sure he/she has good malpractice insurance.  NEVER cut the timber before you have a tax deed.  NEVER cut the timber before talking to an attorney. They might have a different opinion from mine. The attorney who will represent you if there is a lawsuit should be the one to give you advice.

Also, the rule about the redemption click ticking down only after you take possession of the property has a “wrinkle.” If nobody is in possession of the property, then whoever has the deed rights is considered to be in possession.  Logically, if you never set foot on the property after you receive your tax deed, but the former owner (or any tenant of the former owner) also never set foot on the property during that same time period, then your ownership of the deed rights should count as your possession of the property.  Three years later, the former owner’s redemption rights should expire.  I can’t find an Alabama Supreme Court decision that says that exact thing, but I’m reading all of them again, to make sure. Discuss this issue with your attorney if it is relevant. You should never PLAN on the “wrinkle” as a strategy, but if you find yourself stuck with a bad situation, you might use this as an argument for why the former owner no longer has any redemption rights.