In the recent Alabama Court of Civil Appeals case of Asset Preservation, LLC v Oak Road West, LLC, two different investors claimed they owned the redemption rights for a piece of foreclosed real estate in Gulf Shores. The question was: Can a borrower assign its redemption rights only once, or can it assign redemption rights to multiple purchasers?
The court said that once you assign your redemption rights, they are gone. You have nothing left to assign. The first investor won, and the second investor just wasted a lot of money.
As a side issue, I noticed that the first investor had an August 24, 2015 quitclaim deed AND an assignment that specifically mentioned it was assigning the statutory right of redemption. The second investor had only a March 23, 2016 quitclaim deed. The court did not comment on this situation, because it was not necessary. The first investor won because it was first in time. There was no need to dump all over the second investor for EVERYTHING he did wrong.
But, that is why I’m here. To tell you more of the story. Even if the second investor had gotten its quitclaim on August 23, 2015, it would lose anyway. That is because the post-foreclosure statutory right of redemption is a personal right, not a real estate right. It must be sold by an assignment, not by a quitclaim deed. After the foreclosure, the borrower no longer has any real estate rights at all. It has nothing to quitclaim. A quitclaim is worthless.
And the lesson is….if you are buying redemption rights for foreclosed real estate, make sure
- They have not already been sold to somebody else;
- You get an assignment that specifically mentions the statutory right of redemption and the property legal description; and
- The borrower has not lost the redemption rights through failure to vacate within the 10-day notice period, as provided in Alabama Code Section 6-5-251. That was not at issue in the Asset Preservation case, I just threw it into this list for good measure.
To read the Court of Civil Appeals decision, click HERE.
(Note: You can buy and sell tax sale redemption rights with a quitclaim. Not foreclosure redemption rights.)