Unpaid Fire Dues and Tax Sales or Foreclosures

If you buy tax sale property, and there is an unpaid fire dues assessment, who wins in the battle of the liens?

That is the question one of my seminar attendees asked me. I did not know the answer, but offered to find out.

I still don’t know the answer, for sure, but here’s my best opinion:  The fire dues are treated the same as a municipal assessment for sewer improvements, weed-abatement liens, and demolition liens. In other words, they trump the tax sale. The tax sale purchaser (or foreclosure investor, for that matter) will have to pay the dues or lose the property.  This is unlike the battle between a tax sale investor and a bank.  In the case of a bank mortgage, the lender must redeem from the tax sale before it can take the property.  Not so for municipal liens and, apparently, fire dues liens.

Note: As a matter of general interest, you might like to know the redemption rules when there has been a foreclosure of a municipal or fire lien.  At the foreclosure, the purchaser receives a deed and immediately receives all right, title and interest to the property, subject only to redemption rights. (Ala. Code §11-48-49)  The former owner has two years to redeem by paying the purchase price plus 6% interest. There is NO provision for payment of any improvements or insurance premiums during that time period. (Ala. Code §11-48-54)  After the two years has expired, ANY person can apply to the probate judge for a Certificate of Warning to Redeem. (Ala. Code §11-48-56). The former owner has 60 days from the Certificate of Warning within which to redeem, but if it redeems during that extended time period, it is liable for the value of improvements.  (Ala. Code §11-48-58).  If six years passes after the tax sale, without there being a Certificate of Warning to Redeem, then all redemption rights expire. (Ala. Code §11-48-55)

If you lawyers want to read the cases that I read in coming to my conclusion, to see if you agree or not, here they are. No case is on point. You just have to read and figure out which way the wind will blow.

  • First Properties LLC v. J.P. Morgan Chase Bank, 993 So.2d 438 (Ala. 2008)
  • Special Assets LLC v. Chase Home Finance, 991 So.2d 668 (Ala. 2008)
  • Special Assets LLC v. United States Bank, 902 So.2d 711 (Ala. Civ. App. 2004)
  • Minor Heights Fire District v. Skinner, 831 So.2d 609 (Ala. Civ. App. 2002)
  • Holmes v. Concordia Fire District, 625 So.2d 811 (Ala. Civ. App. 1993)
  • Brown v. Minor Heights Fire District, 221 B.R. 849 (N.D. Ala, SD, 1998)