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July 1, 2021

South Carolina Supreme Court Declares 2019 Tax Sale Bill Unconstitutional

By Matt Abee, Randall L. Saunders, Megan L. Southern

The South Carolina Supreme Court issued its three-page opinion yesterday in Mercury Funding, LLC, v. Beaufort County Tax Collector Kimberly Chesney, a case involving the constitutionality of an act extending the 2019 tax sale redemption period. The Court’s opinion likely impacts the portfolios of tax sale buyers who participated in the 2019 tax sale by calling into question the validity of the tax sale or any tax deed a county might issue related to a 2019 tax sale property.

In September 2020, the South Carolina General Assembly passed House Bill 3755, which became Act 174 the next month. The Act dealt primarily with automobile insurance, but also included a provision impacting real property tax sales. Under South Carolina law before Act 174, delinquent taxpayers and other interested parties had one year from the date of the tax sale to redeem real property. Act 174 extended that redemption period for an additional year, but only for real property sold at the 2019 tax sale.

Petitioner Mercury Funding bought property at the 2019 tax sale impacted by the extended redemption period. It sued, challenging the constitutionality of the act under the South Carolina Constitution. The parties generally conceded the Act was unconstitutional, but disagreed on how to address the impacts of a ruling from the Court that the Act was unconstitutional, including:

  1. title issues attached to properties that were redeemed during the extended redemption period;
  2. whether delinquent taxpayers would have additional time to redeem properties that were not redeemed before the Act; and
  3. whether additional written notices to delinquent taxpayers were required before the redemption period could expire and a tax deed issued.

Although the parties explained to the Court during argument that they had reached an agreement on many of these issues, the Court declined to address those issues in its opinion. It instead declared the Act unconstitutional and explained that these other issues “should be vetted initially by a trial court.” Because the case was filed in the Court’s original jurisdiction, this likely means that the related issues will need to be resolved in another lawsuit filed in the Circuit Court, which will later be addressed by the appellate courts in the regular course of litigation.

Matt Abee, Randy Saunders, and Megan Ware-Fitzgerald from the Tax Lien Resolution and Litigation Team are continuing to follow litigation involving Act 174. Tax sale investors should contact counsel at Nelson Mullins with questions about how the Act may impact properties in their portfolios and what the Court’s opinion might mean for the validity of any tax deed issued following the 2019 tax sale.