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Additional Nelson Mullins Alerts

Aug. 30, 2023

Navigating Alabama Tax Sale Redemptions: The Difference Between State Bids and Third-Party Purchases

By Matt Abee, Tyler L. Walker

In the intricate world of property redemption, the Alabama Supreme Court’s recent opinion in Eleanor Williams v. Mari Properties, LLC has cast a spotlight on a critical nuance that may significantly impact the tax sale landscape in Alabama.[1] The distinction between properties bid-in by the State and those purchased by other bidders, is a pivotal factor in determining the eligibility of property redemption.[2] This case delves into this nuanced concept and offers insights into potential implications for property owners and legal practitioners.

Case Background

A legal tussle over property redemption unfolded as Eleanor Williams sought to redeem certain property previously owned by her parents in Birmingham, Alabama. Due to unpaid ad valorem taxes, the property had been sold at a May 13, 2003, tax sale where the State obtained title after no other parties came forward to bid. Over a decade and a couple transactions later, the State conveyed out title to the property and Mari Properties, LLC (the “Company”) became the property’s owner of record.

In September 2017, Williams filed a petition under Ala. Code § 40-10-122 and tendering $1,100 for the redemption of the property. She claimed inheritance from her parents who passed away in 2003, and although she lived on the property until around 2010, she had not paid the taxes during that period. The probate court granted Williams's petition for redemption over sixteen years after the tax sale, directing her to pay the owed taxes and interest to the Company. The probate court also noted its continued jurisdiction for any further orders.

After the Alabama Supreme Court dismissed an initial appeal from the redemption order and remanded the case for further proceedings,[3] the Probate Court entered an amended order in July 2022 that affirmed its original redemption order. Shortly thereafter, the Company again moved to vacate the amended order, asserting a lack of jurisdiction by the probate court, and arguing that Williams should have pursued judicial redemption. After a hearing, the probate court agreed with the Company’s motion and vacated its second redemption order, again deciding that it lacked jurisdiction over the redemption petition. Williams appealed this decision once more to the Alabama Supreme Court.

The Alabama Supreme Court’s Opinion

Williams argued on appeal that she had the right to redeem the property through either the statutory redemption process in Ala. Code § 40-10-120 or the judicial redemption process outlined in Ala. Code §§ 40-10-82 and -83. She contended that the probate court had jurisdiction to grant her petition under both processes.

In response, the Company argued that Williams was not entitled to statutory redemption under Ala. Code § 40-10-120 because she did not redeem the property within three years of the tax sale. The Company asserted that Williams's only option would have been the judicial redemption process under §§ 40-10-82 and -83. However, the Company contends that since the circuit court holds exclusive jurisdiction over judicial redemption, and no applicable law indicates otherwise, the probate court lacked jurisdiction over the redemption petition.

The heart of the legal dispute revolved around the interpretation of Ala. Code § 40-10-120, which delineates two distinct scenarios for property redemption. Under this provision, real estate can be redeemed before title passes from the State or within three years from the date of the tax sale if bought by any other party. The distinction lies in the property's origin: properties bid-on and acquired by the State versus those purchased by parties other than the State.

For properties bought by parties other than the State, property owners can redeem within three years from the sale date by fulfilling certain redemption requirements. In the case of properties bid-on and bought by the State, the right to redeem extends until “the title passes out of the state[.]” This means that property owners aren’t held to a three-year redemption period, but the redemption process must be commenced before the State transfers ownership.

In this case, the Supreme Court affirmed that the property was bid-on and bought by the State in 2003 and confirmed that the redemption window closed upon the State's sale to the Company’s predecessor in 2016. Because Williams did not redeem the property before the title was transferred from the State to, she was not entitled to statutory redemption. This also meant she was not entitled to bring any action in the probate court to force a redemption—that action was only proper in the circuit court.

Implications for Property Owners and Legal Practitioners

This case underscores the importance of understanding the temporal nuances outlined in Ala. Code § 40-10-120(a). Property owners seeking redemption must be aware of whether their tax-sale property was bid-in by the State or bought by a third party. This awareness will dictate their eligibility for redemption and the timeline within which they must act.

In the complex realm of property-tax redemption, the difference between properties bid-in by the State and those bought by other parties is a pivotal factor that decides redemption eligibility. Eleanor Williams v. Mari Properties, LLC shows the need for precision in understanding the jurisdiction of the courts in which a redemption petition will be filed, as well as an investor’s rights in opposing such a petition. By paying close attention to the method by which the property was auction and to whom, investors can raise jurisdictional objections to improper attempts to assert belated redemption under Ala. Code § 40-10-120.

Who to Contact?

Matt Abee, Tyler Walker, and the Nelson Mullins Tax Lien Resolution and Litigation Team are available to answer questions about how Eleanor Williams v. Mari Properties, LLC may impact tax sale investors, servicers, and others in the industry with portfolios in Alabama. 

 

[1] This opinion was issued on August 18, 2023, and available from the Alabama Supreme Court at https://bit.ly/3suVMY7 and at 2023 WL 5313962.

[2] See Ala. Code § 40-10-120.

[3] See Williams v. Mari Props, LLC, 329 So. 3d 1237 (Ala. 2020).