It has long been considered part of the American Dream for citizens to own their own property. However, this may be more complicated than it seems. Certain states, such as Alabama, set time limits on when a purchaser must take possession of property in certain types of sales.
Recently, in Baldwin County, the Court of Civil Appeals addressed this very issue in Rioprop Holdings, LLC v. Compass Bank, et al. In 2007, after Walter Striplin failed to pay the property taxes on property in the Dunes Condominiums in Gulf Shores, the Baldwin County revenue commissioner conducted a tax sale of the property.
Plymouth Park Tax Services purchased the property for $35,826.16 at the sale. However, Plymouth never took action to obtain possession of the property and it did not notify the bank, Compass, holding the mortgage of its interest in the property.
Plymouth obtained a tax deed in the property and then conveyed its interest to Propel Financial 1, LLC. Rioprop Holdings, LLC managed Propel’s real estate. Rioprop then sued Compass and Striplin seeking a declaration that it held an enforceable lien on the property, with priority over all other liens. Rioprop also sued to establish its title to the property, to establish a tax lien and for damages for unjust enrichment.
The trial court dismissed the ejectment and quiet-title claims and entered a judgment in favor of Striplin on the enforceable lien claim. Rioprop appealed.
The appellate court affirmed the lower court’s decisions. First, the lower court dismissed Rioprop’s claims for ejectment and quiet title. Under Alabama law, someone may not file an action for the recovery of real estate sold for the payment of taxes more than three years from the date of sale. Rioprop purchased the property in 2008 but did not file its action until 2016; the claims for ejectment and to quiet title were properly dismissed.
Additionally, the Court ruled that because Rioprop did not exercise its right in obtaining possession of the property within three years, the property reverted to Striplin. When the property did this, Striplin was not required to pay to redeem the property. Thus, the judgment in favor of Strilin on the enforceable lien claim was also affirmed.
The lesson here is that when purchasing property at a tax sale in Alabama, a purchaser must take action to take possession of that property within three years. Failure to do this allows the property to “reinvest” or go back to the previous owner. This means that any liens filed against the property or actions to establish title against the property are invalid, as Rioprop found out.
If you are involved in a property dispute, contact INGRAM LAW LLC at (205) 335-2640 for an attorney with the experience and knowledge that can make all the difference.