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July 15, 2021

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May 6, 2021

South Carolina Supreme Court Holds Oral Argument Regarding 2019 Tax Sales

By Matt Abee, Randall L. Saunders, Megan Ware-Fitzgerald

In one of the first oral arguments held in person since the start of the pandemic, the South Carolina Supreme Court heard from the parties today in Mercury Funding, LLC, v. Beaufort County Tax Collector Kimberly Chesney, a case filed in the Court’s original jurisdiction involving the constitutionality of an act involving 2019 tax sales. The Court has not yet issued its opinion, though its ultimate decision is expected to impact the portfolios of tax sale buyers who participated in the 2019 tax sale regardless of the outcome.

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.

Mercury Funding purchased property at the 2019 tax sale impacted by the extended redemption period. It sued, challenging the constitutionality of the act on several grounds. The parties — including the tax collector — generally conceded the unconstitutionality of the act, so today’s argument focused on the practical issues associated with unwinding actions taken at the county level under an act the parties concede is unconstitutional.

As discussed during oral arguments today, any ultimate opinion in the case will need to address:

  1. The title issues attached to properties that were redeemed during the extended redemption period.
  2. How long after the Court’s opinion should delinquent taxpayers have to redeem properties that have not yet been redeemed.
  3. Whether the Court could declare the extended redemption period unconstitutional, while also upholding the remaining portions of Act 174.

Although the parties explained to the Court during argument that they had reached an agreement on many of these issues, the Court questioned whether it could issue an opinion adopting such a settlement that would properly bind delinquent taxpayers, counties, and tax sale purchasers who were not parties to the lawsuit. To address this issue, the Court questioned whether it could, sitting in its original jurisdiction, certify a class action involving all delinquent taxpayers, counties, and tax sale purchasers to give them the opportunity to object to any settlement reached by the parties.

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 how any settlement in the lawsuit might impact their rights.