A Georgia man is challenging Mobile County’s property redemption process over paperwork he claims prevented him from paying his unpaid taxes and ultimately led to a house on his property being demolished by an investor who refused to respond to his letters.
The issue revolves around tax sales that occur when a property owner fails to pay his or her ad valorem taxes, as counties are allowed to sell properties to satisfy any delinquent taxes the owners have failed to pay.
When this happens, a private investor can purchase a tax lien on a delinquent property, giving them the right to acquire the land outright following a three-year redemption period allowing the owner to reclaim the property.
Before 2002, paying the back taxes at a 12 percent interest rate was the only requirement to redeem a property in Alabama. Since then, however, a change in state law has required that redemptioners reimburse a tax lienholder for any “reasonable expenses” incurred, such as premiums paid for an insurance policy or improvements securing the value of the land.
While that may sound strange to those unfamiliar with the practice, property investor Tyler Prescott told Lagniappe the law was added for good reason and protects investors like himself.
“Before then, we’d get letters essentially saying we’d go to jail if we didn’t do things like cut the grass, which we could ultimately receive no compensation for,” Prescott said. “You wouldn’t want to cut grass at a property for three years just to have to someone redeem it.”
The burden of ensuring any dispute over how much an investor is owed falls on the tax officials in each county, and by law those issues have to be resolved before the redemption process can proceed. In Mobile County, Revenue Commissioner Kim Hastie’s office handles it.
Derrick Coleman, property tax director with the Alabama Department of Revenue, said the state tried to streamline the process by creating a joint-affidavit both parties could sign to ensure everyone was on the same page about what was owed during a redemption.
Since 2013, those affidavits have been used by various counties throughout the state, though the completion of the form itself is not required by law because, as Coleman said, the “use of the affidavit is not contained in [the] statute” governing property redemptions in Alabama.
“The affidavit was created by the department as a tool for the county tax official to have,” Coleman added. “[It] is available for use in each Alabama county. We are not aware of a county redemption official who does not use the department’s affidavit or a similar document serving the same purpose.”
However, in Mobile County the revenue commission will not issue a certificate of redemption unless both parties have completed the affidavit. In some cases, that isn’t a problem, and Prescott said he’s signed affidavits for multiple properties in a single day. However, others say requiring a completed affidavit allows an investor to simply ignore or refuse to sign the document, which can sideline a previous owner’s attempt to regain a property.
Though Prescott said tax officials “usually step in if there’s any problem,” Erica Thomas, who oversees property redemptions in Mobile County, said “the party wishing to redeem must go through probate court for a redemption hearing to settle the matter” when that situation occurs.
However, for residents already struggling to pay back taxes and reimbursements lawfully due to an investor, those legal expenses may not be possible. That’s why some counties don’t require the affidavit to be signed by both parties in certain circumstances.
Baldwin County Revenue Commissioner Teddy Faust said it can create a situation where redemptioners can be taken advantage of, which is why his department doesn’t require the completed affidavit if an investor fails to respond to or refuses to sign it — especially if there are no disputed expenses.
“To my knowledge, that document is not a mandate. It’s not required,” Faust said. “Typically, if an investor won’t sign the affidavit, we’ll let the property owner go ahead and redeem anyway. If not, somebody could sit there and hold you hostage forever.”
Petitioner Ernest Lewis believes that might have already happened to him, and now he’s bringing a legal challenge over the tax sale of a property he inherited in North Mobile County.
Lewis v. Davis
Lewis lives in Georgia but inherited a property on Old Citronelle Highway in Chunchula after his mother passed away. However, after taxes due for that property became delinquent, the Revenue Commission sold it to the state in 2013.
In 2014, investor David James Davis purchased a $863 tax lien on the property, which listed a fair market value of $34,200 the same year. Land records also indicate it was one of six tax liens Davis purchased in the same area over a two-year period.
According to the available court documents, Lewis received a letter from Hastie on Jan. 27, 2016, informing him the property would be deeded to Davis outright unless the delinquent taxes were paid and Davis was reimbursed for his expenses by May 30, 2016.
Lewis claims he immediately began trying to comply with those requirements, but “the commissioner’s office refused to accept any money from him, unless it was accompanied by the fully executed redemption affidavit.”
According to his petition, Lewis spent the next four months unsuccessfully trying to contact Davis through the mail and over the phone. Copies of that correspondence, including receipts for certified mail he sent to Davis and money orders made out to the county totaling $1,767.43, were submitted in the court record as well.
All of those items were dated prior to the May 30, 2016, deadline mentioned in Hastie’s letter, but still, Lewis was unable to secure the property. “Fearing the imminent possibility of losing the property,” he took legal action six days before the deadline.
Lewis petitioned the probate court to intervene because of his “inability to contact Davis.” Hastie’s office was notified of Lewis’ legal challenge, but that didn’t stop the Revenue Commission from issuing a deed to Davis on July 1, 2016.According to court records, Davis wasn’t served a subpoena related to Lewis’ legal challenge until Sept. 27, 2016. Four days later, he “demolished the residential structure that stood on the property.”
While Lewis’ legal challenge was initially aimed at finishing the property redemption he tried to start last winter, the issuance of the deed and the demolition of the house prompted his attorney to amend the petition to include Hastie in her official capacity. Now, Lewis is challenging the practice her office uses when processing all of its property redemptions.
“The commissioner, who knew or should have known this action was pending, failed to ascertain whether or not the parties properly performed under the statute, and then issued a tax deed to Davis, in the midst of this action — despite the lack of any cognizable authority supporting her actions,” the complaint reads. “The commissioner’s practices and procedures in using the redemption affidavit, as a means to further the redemption process, results in an unreasonable and unconstitutional denial of due process rights, as preserved by the statute, and in this case, it also led to the demolition of the residential structure which stood on the property.”
Hastie did not respond to calls seeking comment for this story. Going forward, though, Lewis’ challenge could potentially affect other property reclamations handled by her office, and Mobile County already processes a high volume of tax sales and property redemptions.
In 2015 alone, there were 587 tax sales redeemed by the original owners in Mobile County, and that doesn’t include 696 that remain unredeemed. Including Lewis’, there are at least 11 probate court hearings related to property redemptions the Revenue Commission is currently aware of, though it’s unclear what the nature of those challenges is at this time.