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Additional Nelson Mullins Alerts

May 14, 2024

Navigating South Carolina Tax Sales: County’s Posting of Conspicuous Notices

By Matt Abee

In an unpublished opinion released on May 12 in Grayson Dailey v. SC Home Holdings, LLC (Op. No. 2024-UP-164), the South Carolina Court of Appeals upheld the tax sale of real property in Lexington County over the objection of the delinquent taxpayer. The appeal touches on the state law requirement that notice be posted in a “conspicuous place” on the property as a part of the pre-sale notice process. Although the opinion is unpublished and not binding in other cases, the posting issues addressed are likely to be raised in other cases and could impact investors’ tax-lien portfolios in the future.

Background

The dispute arose from a delinquent tax sale of Dailey’s two-acre property in Lexington. Because mailed notice of the tax sale had been returned undeliverable, the Tax Collector posted notice of the tax sale on Dailey’s property under S.C. Code Ann. § 12-51-40(c). As shown on a map entered as an exhibit, the Tax Collector posted the notice on a tree leading to the property that could be seen from the driveway (marked below as a red dot). Dailey even conceded that the notice could have been seen from his driveway connecting his property with Park Road. Unbeknownst to the Tax Collector, however, Dailey regularly used his neighbor’s driveway further south off of Park Road to access his property, so Daily usually did not travel far enough up Park Road to see where the noticed had been posted. As a result, Dailey did not actually see the notice, and claimed the tax sale was defective because the notice was not posted in a conspicuous place as required by state law.

The Court’s Ruling

The Court of Appeals affirmed the Master in Equity’s ruling upholding tax sale. The Court of Appeals held that the County had indeed placed the notice in a conspicuous place because the notice was posted in “a location that is reasonably likely to be seen.” The Court of Appeals further held that the County had no way of knowing that Dailey used his neighbor’s driveway as Dailey had no recorded easement or interest in his neighbor’s property to put the County on notice of that alternative route to access Dailey’s property. Thus, Dailey could not carry his burden of establishing that the County failed to strictly comply with the tax sale statutes’ posting requirement.

Impact on Your Tax-Lien Portfolio

Because the opinion is unpublished, it likely will not have a direct impact on the properties within a tax-lien investor’s portfolio. Yet the opinion highlights an important risks tax sale bidders must factor into their bids at tax sales and that property owners facing the forced sale of their property must consider. 

Under state law, tax collectors must strictly comply with the statutory tax-sale notice requirements where those requirements are intended to protect the delinquent taxpayer. Yet the tax-sale bidder has no control over the process used by the tax collector in providing the required statutory notices. As Dailey’s challenge to the tax sale shows, there are a variety of ways a delinquent taxpayer may challenge the way notice was mailed, posted, or published as a means of attacking the validity of the tax sale. In almost all occasions, the tax collector’s actions (or inactions) are outside of the tax-sale bidder’s control. Fortunately, the courts upheld the reasonableness of the County’s actions in this case, even in the face of the state’s strict-compliance standard.  Had the courts ruled differently, however, there would have been little the tax-sale bidder could have done to protect its investment in the property beforehand. For that reason, tax-sale bidders must account for this risk when bidding on properties at tax sale, and properly analyze this risk when litigation challenging the tax sale is filed. 

Who to Contact?

Matt Abee and the Nelson Mullins Tax Lien Resolution and Litigation Team are available to answer questions about how Grayson Dailey v. SC Home Holdings, LLC may impact tax sale investors, servicers, and others in the industry with portfolios in South Carolina. Please reach out to these attorneys for more information about how you may be able to seek to quiet title after tax sale as a part of your investment in South Carolina tax liens.