Category: Tax Sales

Georgia Tax Deed Purchasers Are Responsible for Paying Association Dues

Under Georgia law, a tax deed purchaser is obligated to pay homeowners’ association assessments that come due after the tax sale. See Croft v. Fairfield Plantation Property Owners Assn., 276 Ga. App. 311, 314 (2005). This includes the period before the purchaser can foreclose on the right of redemption. Georgia courts have held that a tax deed purchaser acquires sufficient title to trigger automatic membership in the association. The rationale is that assessments and fees paid to a homeowners’ associations benefit a tax deed purchaser.

The good news for tax deed holders is that Georgia courts allow tax deed holders to include condominium association assessments paid as part of the redemption price. Harvest Assets, LLC v. Northlake Manor Condo. Assn., 340 Ga. App. 237 (2017).

Georgia Tax Deeds: Excess Tax-Sale Funds and Super Liens

There was an important shift in Georgia tax deed law last year. The Georgia Supreme Court, in DLT List, LLC vs. M7even, 301 Ga. 131 (2017), decided that a party who redeems a tax deed is not automatically first in line to receive excess tax-sale funds following a tax sale.

The facts of DLT List are straightforward: a property was auctioned at a tax sale and sold for $110,000. The delinquent taxes were $5,000, so there were $105,000 in excess tax-sale funds. The delinquent taxpayer applied to the tax commissioner to receive the excess funds–there were no other claims to the funds. Several months later, a third-party, who held a lien against another property owned by the delinquent taxpayer, redeemed. The redeeming party applied for the excess tax-sale funds. The question became who was entitled to the excess tax-sale proceeds.

Under existing law in Georgia, a redeeming party, simply by virtue of redeeming, is entitled to first position against excess tax-sale funds. This arose out of an often-cited case, National Tax Funding vs. Harpagon, 277 Ga. 41 (2003), which involved competing lien holders in the context of a tax sale. Harpagon held that following a tax sale, a competing lien holder had two choices: (1) claim the excess tax-sale funds, or (2) redeem the property. Importantly, if a competing lien holder chose to redeem, the redemption converted the competing lien holder’s claim into a first-position lien against the property. This is known as a “super lien” and allows a redeeming party to leapfrog over higher priority creditors. A super lien has many benefits for tax sale investors.

Redeeming parties, relying on the super lien language in Harpagon, began claiming their super lien status not only gave them a first-position lien against the property, but also entitled them to the excess tax-sale funds following redemption. These claims were affirmed by the courts in cases like Wester v. United Capital Financial of Atlanta, LLC, 282 Ga. App. 392 (2006).

Fast forward to 2017.  In DLT List, LLC vs. M7even, the Georgia Supreme Court revisited the issue of excess tax-sale funds and found that super liens attach only to real estate, not to personal property. Therefore, because excess tax-sale funds are personal property, super liens don’t attach to excess tax-sale funds. Thus, redeeming parties aren’t entitled to any preference with regard to excess tax-sale funds. By so deciding, the Supreme Court distinguished Harpagon and overruled cases like Wester.

While this ruling isn’t likely to slow down the tax deed business in Georgia, as a real estate investor, it’s something to be aware of.

How to redeem a tax deed in Georgia

In Georgia, when real estate is sold at a tax sale, the taxpayer or any person having a right, title, interest in, or lien upon the property may buy it at any time within 12 months from the date of sale by paying the redemption price. The property may be redeemed at any time after the initial 12 months until the tax sale buyer forecloses (or terminates) the right to do so by giving proper notice.

To redeem a property following a tax sale, the redeeming party must pay the amount paid for the property at the tax sale, plus any taxes paid on the property by the purchaser after the sale for taxes, plus any special assessments on the property, plus a premium of 20 percent of the amount for the first year or fraction of a year which has elapsed between the date of the sale and the date on which the redemption payment is made and 10 percent for each year or fraction of a year thereafter.

After 12 months from the date of the tax sale, the purchaser can forever bar redemption of the property by giving notice to the delinquent taxpayer, the occupant, if any, and upon all persons having recorded any right, title, interest in, or lien on the property in the county where the land is located. The purchaser must write an original notice in accordance with Georgia law, and deliver this notice, together with a list of persons to be served, to the sheriff of the county in which the real estate is located. The notice must be delivered not less than 45 days before the date set in the notice for termination of the right of redemption.

Should a party seeking to redeem a property fail to assert its rights to redeem the property within the initial 12 month period or within the time allowed under the notice of right of foreclosure summarized above, the redeeming party’s interest in the property is forever cancelled.

Whether you’re buying a tax deed or seeking to redeem a tax deed, please call us to discuss your options.