It’s been almost a year since Mobile County Revenue Commissioner Kim Hastie was dragged into a lawsuit filed over the way her office processes petitions to redeem tax-delinquent properties, but even with clarification from the state those policies remain unchanged.
Redemptions occur when a landowner seeks to redeem a property another party has purchased a “tax lien” on. Those liens can be purchased by private investors who, by paying the back taxes on a property, can have it deeded to them outright after three years.
That time gives homeowners a chance to pay the delinquent ad valorem taxes owed to the county and redeem the property themselves, but the process for doing so has been complicated by changes in state law that, if abused, tip the scales in a tax purchaser’s favor.
Since 2013, Alabama has required “redeeming parties” to reimburse tax purchasers for the cost of things such as insurance premiums or property improvements they incur in that three-year period.
Redemption officials, including Commissioner Hastie, are tasked with ensuring those reimbursements are agreed upon before a redemption can proceed. The Alabama Department of Revenue (ADOR) tried to streamline that task by creating a “redemption affidavit” both parties can sign.
The trouble is, Hastie’s office requires redeeming parties to get the affidavit signed before their redemption can move forward at all, even if the other financial obligations are in order.
The policy isn’t a problem if the tax purchaser cooperates, but if they choose not to it only takes a few years of dodging phone calls and letters to secure property for pennies on the dollar, which leaves owners with little recourse to reclaim their property.
“This happens a lot both locally and across the state, perhaps in some counties more than others,” Mobile County Attorney Jay Ross said. “It’s a very convoluted area of law, and there’s somewhat of a cottage industry of people who make money on these tax sales.”
While all 67 Alabama counties use the redemption affidavit or a similar document, not all place the same importance on it. Baldwin County, for instance, uses the affidavit but still allows owners to redeem their property if a tax purchaser refuses to cooperate and sign the document.
The vast majority of Alabama counties don’t require both parties to sign a single document, but that policy persists in Mobile County despite a number of cases where it’s gummed up the process. By law, the probate court can settle disputed redemptions, which typically occur when parties can’t agree on what is owed.
Since 2015, a number of legal actions have been filed in probate court including at least six Lagniappe could identify that were temporarily sidelined when a tax purchaser “refused” to sign that joint affidavit.
Though the court was able to move most of those redemptions along, for many already struggling to pay their taxes hiring a lawyer for a legal battle just isn’t financially feasible.
One lawsuit over a property in Chunchula, though, has continued to move toward a bench trial before Probate Judge Don Davis, a case that could very likely affect future property redemptions locally and may have statewide implications as well.
Georgia resident Ernest Lewis inherited property on Old Citronelle Highway from his deceased mother, but when the taxes became delinquent, investor David James Davis purchased a $863 lien on the property, which is roughly 2 percent of the land’s fair market value in 2014.
Though he was prepared to pay the back taxes and reimbursements, Lewis spent five months last year trying to contact Davis over the phone and through certified letters so he could complete the joint affidavit Hastie told him was required to proceed with the redemption.
Lewis eventually took the matter to Probate Court, where it might have been quickly resolved where it not for Hastie’s office issuing Davis a tax deed for the property after being notified of the pending legal action. Now the office has found itself ensnared in Lewis’ lawsuit as well.
“In my mind, that should have be like a caution flag or red flag … meaning nothing should happen relative to that parcel of property because you’ve got legal action pending,” Lewis told Lagniappe. “Even NASCAR knows when there’s a caution flag, you stop racing.”
Complicating matters further, the investor had the residential structure on the property bulldozed months after obtaining the tax deed for the property, though it was only a few days after he was served with a subpoena in Lewis’ lawsuit, according to neighbors in the area.
County attorneys quickly sought to bring ADOR into the lawsuit as well after claiming its requirement to complete the affidavit was based on advice given in a September 2013 memo ADOR sent to all to redemption officials introducing the document for the first time.
However, in briefs submitted earlier this year by Assistant Attorney General Keith Maddox, ADOR refuted claims that its “strong suggestion” to use the affidavit was somehow a mandate.
“Apparently, there have been several instances in Mobile County involving property redemptioners being unable to have the affidavit signed by the tax sale purchaser,” Maddox wrote. “The department of revenue realizes the logistics of the affidavit, as well as the entire redemption process, work more smoothly when the proposed redemptioner and tax sale purchaser cooperate. However, in cases of a lack of cooperation between the redemptioner and purchaser, ADOR also believes [the Probate Court] can determine the amount due.”
Lewis believes the 18 months of legal filings has been more akin to legal stalling, which has added to the time and money it’s cost him to secure a relatively low-value piece of property. The final legal expense hasn’t been determined, but Lewis said it immediately exceeded what he owed in back taxes and has continued to increase ever since.
“I’ll put it this way, the average person would likely have thrown up their hands and said ‘I can’t afford for this to keep going. It’s not worth the headache.’” he said. “And I think that’s what this is an effort to bring about, but, what’s right is right and what’s wrong is wrong, and clearly, what’s going on here is wrong.”
As for the county, Ross said he was limited in what he could discuss about the case itself, though he and officials overseeing local redemptions have confirmed there have not been any changes in the county’s use of the redemption affidavit. However, the Lewis’ case could potentially change that.
“The plan is to go through the litigation process and get a judicial ruling, which will clearly guide how Commissioner Hastie handles this in future, though I don’t know how that could affect revenue officials in other counties,” he said. “We plan to follow whatever Judge Davis’ ruling is.”
A trial in the case has been tentatively scheduled in February 2018.