Category: Real Estate Litigation

Does a Foreclosure Sale Determine Fair Market Value in Georgia?

The answer is a resounding yes according to an interesting case that came out recently. SeeDekalb County Board Of Tax Assessors v. Astor Atl, LLC, A19A0516 (April 1, 2019). In that case, the Georgia Court of Appeals rejected DeKalb County’s argument that it could assess property taxes in an amount higher than the price paid for the same property at a foreclosure sale.

Dekalb County argued that a foreclosure sale does not qualify under as an arm’s length, bona fide sale, and that it had appraised the property in conformity with its rules using the sales comparison approach.

In deciding the case, the Georgia Court of Appeals referenced O.C.G.A. § 48-5-2(3), which provides a limitation on the maximum allowable fair market value. Under that statute, “the transaction amount of the most recent arm’s length, bona fide sale in any year shall be the maximum allowable fair market value for the next taxable year.”

The decision concluded by holding that foreclosure sales can be arm’s length, bona fide sales. Moreover, the fact that the sale may not bring in the true market value of the property does not require a different rule; the fact that the sale results in a financial loss is not relevant.

The court noted that foreclosure sales are distinct from tax sales. While foreclosures are considered arm’s length, bona fide sales, tax sales are considered “forced sales” because owner retains a right of redemption, so the tax deed purchaser does not obtain proper title until the redemption period has run.

While this isn’t super helpful in the current market with surging property values, it would definitely help investors should the real estate market turn south down the road. Something to keep in mind.

Please call us at 404-382-9994 for real estate related questions.

Landlord Wins Wrongful Eviction Case

There is a lot of confusion when it comes to evicting a tenant. One of the questions is the amount of damages a tenant is entitled to if wrongly evicted. The issue was addressed recently by the Georgia Court of Appeals in Hart v. Walker, A18A1320. In that case, the landlord clearly wrongfully evicted the tenant by changing the locks when she and the tenant got into a dispute.

Please don’t do this—in almost all instances, a landlord in Georgia must file an eviction in court in order to deprive a tenant of possession. Georgia is not a self-help state.

The tenant sued the landlord claiming wrongful eviction and damage to personal property. He also claimed out-of-pocket expenses.

The trial court ruled that although the tenant was wrongfully evicted, the tenant wasn’t entitled to recover any damages against the landlord. The appeals court agreed. At trial, the tenant had an expert testify to the fair market value of the items, but he was unable to convince the trial court that he in fact owned the items in question. The appeals court explained that the trial court is entitled to evaluate the credibility of a witness, and, if the witness isn’t credible, it can reject the witness’ testimony. Here, obviously, the trial court didn’t believe the tenant that he owned the items in question. Regarding the tenant’s out-of-pocket expenses for food and a motel, the appeal court noted that the tenant would have to incur such expenses regardless of the wrongful eviction. Therefore, these damages were too remote.

While this case addressed damages, as a landlord, if there’s anything you take away from this blog, it should be that changing the locks isn’t the way to go. The landlord in this case was fortunate that the tenant was unable to make a case for damages.

The Insurability of Tax Deed Titles

If you’ve purchased a tax deed in Georgia, what do you need to do to obtain ownership of the property? That’s a question we get frequently. First and foremost, following a tax sale, you need to bar the right of redemption of the owner who didn’t pay taxes and any party who holds an interest in the property. This has been covered in other blogs on this website. But what about after you’ve barred the right to redeem, are you able to put up for sale sign and sell the property?

Generally, if there’s a non-judicial tax sale on the property within the past 20 years, the answer is no. In other words, most title insurance companies won’t title insure such properties. So what to do. There are generally three ways to obtain full title or what is known as “marketable title.”

The first way is to adversely possess the property for more than four years. This means taking full possession of the property in a manner that is (i) hostile (against the right of the true owner and without permission); (ii) actual (exercising control over the property); (iii) exclusive; (iv) open and notorious (using the property as the real owner would, without hiding occupancy); and (v) continuous.

The second way is to get a quitclaim deed from the of the owner who didn’t pay taxes and any party who holds an interest in the property.

The third way is to file a quiet title action in the Superior Court in which the property is located. In such a lawsuit the owner who didn’t pay taxes and any party who holds an interest in the property are named and given an opportunity to object.

Please call with any questions regarding tax deeds or any of the above methods of obtaining marketable title once a barment notices have been completed.

Can a tax commissioner apply excess funds to post-tax sale property taxes?

Iglesia Del Dios Vivo Columna Y Apoyo De La Verdad La Luz Del Mundo, Inc. v. Downing, 321 Ga. App. 778 (2013) addressed this issue, and the answer, quite simply, is NO. (Bonus points for being able to say the plaintiff’s name in that case three times fast.)

The guiding statute is O.C.G.A. § 48-4-5, which provides that any excess funds existing “after paying taxes, costs, and all expenses of a sale made by the tax commissioner” shall be distributed “to the owner or owners as their interests appear in the order of priority in which their interests exist.”

So, while a tax commissioner is authorized to apply excess funds to satisfy outstanding property taxes owed by the delinquent taxpayer that accrued before the tax sale, it can’t do so after the tax sale. This reasoning for this is that the tax deed purchaser, not the delinquent taxpayer, is liable for post-tax sale property taxes.

What about a situation in which post-tax sale property taxes accrue before the tax deed purchaser has barred the right of redemption? In this situation, the delinquent taxpayer still has possession and the tax deed purchaser doesn’t have full title. Is the delinquent taxpayer jointly liable with the tax deed purchaser? According to the Downing case, the answer is no.  Only the tax deed purchaser is liable for post-tax sale property taxes; this is regardless of whether the right to redeem has been barred.

Service by Publication in a Quiet Title or Tax Deed Barment

In both a tax deed barment and the subsequent quiet title, a critical part of the procedure is serving all parties with an interest in the subject property. This includes lien holders, heirs, and anyone else with a claim against the property.

Often in these situations, especially when the property is distressed or abandoned, parties connected with the property may be hard to find. The best example is the delinquent taxpayer. That party has not paid taxes for one or more years, and, many times, has abandoned possession. If the delinquent taxpayer is gone and hasn’t left a forwarding address, that party may be anywhere.

What must be done in these situations? A reasonable and diligent search must be conducted to find and serve each party that has an interest. In a barment, this requires personal service for parties residing in the county of the tax sale or certified mail for parties residing outside the county. In a quiet title, personal service is required.

What if personal service or certified mail is unsuccessful? For example, you get back the certified letter stating it is undeliverable. In those situations, you’re entitled to serve by publication. This usually means advertising notice of the barment or lawsuit in the official county newspaper for four consecutive weeks.

Sound simple . . . usually it is  straightforward, but there are times when things don’t work out as expected. In a recent case, Dukes v. Munoz et al., A18A0572 (decided June 15, 2018), a tax deed holder, unable to serve the delinquent taxpayer, hired an investigator. The investigator came back saying the delinquent taxpayer could not be found after reasonable search. Relying on the investigator’s testimony, the tax deed holder barred the taxpayer’s right of redemption and filed a successful quiet title action.

Happy tax deed holder and end of story . . . not so much. Turns out that the delinquent taxpayer was a Georgia state legislator, who found out about the barment and quiet title. The Georgia Court of Appeals ruled that because a Google search would have provided the address for the delinquent taxpayer, the tax deed holder had not exercised proper diligence in locating the delinquent taxpayer. Therefore, service by publication was improper and the barment and quiet title were voided; the tax deed holder was forced to incur the expense of the barment and quiet title.

The takeaway is that it’s not sufficient to use the last known address of party if that address appears invalid. The best approach, in our opinion, is to spend a little extra money to make sure parties with an interest are served and given a proper opportunity to object.