I get this question a LOT. “If someone redeems, do they pay for the VALUE of the post auction improvements, or the COST?” The answer is: The VALUE.
Both the foreclosure redemption and the tax sale redemption statutes require redeeming parties to pay for improvements under some circumstances. Through unfamiliarity with the law, most investors faced with a redemption demand include a line item for the cost of their repairs or their permanent improvements, as relevant. They are leaving far too much money on the table. In addition, they are rewarding default by selling an improved property back to the former owner, for just the out of pocket expenses of the investor. Think about it–that’s not fair!
The wording of the tax sale redemption statutes is based on the foreclosure statutes. As a result, appellate decisions regarding foreclosure redemption are also good law for tax sale redemption. This is what our courts have to say on the subject:
The redemption statute “does not deal with the cost, but rather with the value, of the permanent improvements…While the cost of improvements is related to the value, the reasonable value is made the basis of payment by the redemptioner.” Wallace v. Beasley, 439 So.2d 133 (Ala. 1983).
Some people argue that “value” means the value of the “job.” If I repair a roof at a cost of $100, but a roofer would have charged $500, then those people say the value is $500. No! If the roof repairs increased the value of the property by $1,000, then the value is $1,000. For additional support, please read the case of E.B. Investments v. Pavilion Development, Alabama Supreme Court, decided May 13, 2016, released February 24, 2017, available HERE. It contains a detailed factual analysis of post foreclosure improvements and value.