Under circumstances where a Mississippi property that is encumbered by a mortgage or Deed of Trust has been sold for non-payment of taxes, the lien can be extinguished if the property is not redeemed within two (2) years of the date of the tax sale. One does not have to look far to become inundated with sales pitches regarding wealth and fortune associated with acquiring properties through tax sales and deeds. In recent years, internet blogs and television infomercials have exploded on the scene thereby giving rise to an increase in general awareness of properties being sold for taxes and also to increased competition among tax sale buyers.
From a foreclosure perspective, tax sales and deeds are definitely a problematic “thorn in the side”. Foreclosure attorneys must exercise extreme diligence to ensure that tax sale purchasers do not ultimately reap a windfall benefit a the expense of a lender / servicer client.
The following is a brief summary of Mississippi law and procedures pertaining to the sale of properties for non-payment of property taxes:
Ad valorem taxes (i.e., property taxes) for a particular property are assessed as of January 1 of a particular year. These taxes are due and payable on or before February 1 of the following year. By statute, the assessment constitutes a lien on the real property and in order to enforce the lien, the County Tax Collector has the right to sell the property for unpaid taxes. In connection with the sale, no actual notice is given, but notice of the sale is published in the newspaper of general circulation within the County.
Mississippi Code Ann. § 27-41-55 (1972), as amended, authorizes the sale of properties for unpaid taxes on the last Monday in August, or at the option of the Chancery Clerk, the sales may be held on the first Monday of April of each year. Under Mississippi law, any person with an ownership interest in the property or holding a lien interest on the property has the absolute right to redeem the property from the particular tax sale by remitting to the Tax Collector or the Chancery Clerk the amount of the taxes, plus penalty (5% of the taxed amount) and interest (1% of the taxed amount per month from and after the month of sale) and expenses incurred in connection with the sale itself. Mississippi Law provides for a 2-year redemption period, from and after the date of sale. In the event the 2-year redemption period expires without payment of the referenced amounts, the tax sale purchaser is entitled to receive a tax deed from the Chancery Clerk. See Mississippi Code Ann. § 27-45-1 (1972), as amended, et seq. This tax deed effectively wipes out the lender’s lien interest in the property.
Mississippi Code Ann. § 27-43-1 (1972), as amended, et seq, provides an affirmative requirement for the Chancery Clerk to provide the record owner(s) and any lien holder(s) with actual written notice of the impending expiration of the redemption period. The Clerk has a duty to search the land records and to provide notice to any lien-holder of record. The Clerk’s obligation is limited to providing notice to the current holder of record; consequently, this brings into play the importance of the proper and timely filing of Assignments on acquired loans.
For the most part, lenders and servicers prefer not pay delinquent taxes on loans that are in foreclosure. The thought process being that should the property sell to a third party at the foreclosure sale, the property will be conveyed subject to the outstanding taxes and the costs of redeeming the property from the delinquent taxes can be passed on to the third party purchaser. This practice is somewhat risky and gives rise to potential disaster if the property has been sold for taxes, but is not redeemed prior to the running of the statute of the two (2) year redemption period.
This topic is foremost in my mind as the two (2) year redemption period on the 2006 taxes runs today. For “August sale” counties, properties with delinquent taxes were sold for the taxes on Agust 27, 2007. Unless redeemed by 5:00 p.m. today, the tax sale purchaser will be entitled to a tax deed, which upon confirmation, will completely extinguish an outstanding mortgage or Deed of Trust. Adams & Edens personnel have spent countless hours over the past several weeks reviewing all open foreclosure files and visiting with the Chancery Clerks’ offices in the counties where the properties are located to confirm that no client is in danger of losing a lien to a tax deed. The investment in time is substantial, but the danger associated with a client losing its lien while the loan file is “on our watch” makes the process a “necessary evil”.
The following Counties hold sales and have maturity dates in April:
Attala Noxubee
Amite Quitman
Bolivar Sunflower
Coahoma Washington
Lowndes Wilkinson
Montgomery Yalobusha
The following Counties hold sales and have maturity dates in August:
Adams Greene Lauderdale Pontotoc Wayne
Alcorn Grenada Lawrence Prentiss Webster
Attala Hancock Leake Rankin Wilkinson
Benton Harrison Lee Scott Yazoo
Calhoun Hinds Leflore Sharkey
Carroll Holmes Lincoln Simpson
Chickasaw Humphreys Madison Smith
Choctaw Issaquena Marion Stone
Claiborne Itawamba Marshall Tallahatchie
Clarke Jackson Monroe Tate
Clay Jasper Neshoba Tippah
Copiah Jefferson Newton Tishomingo
Covington Jefferson Davis Oktibbeha Tunica
DeSoto Jones Panola Union
Forrest Kemper Pearl River Walthall
Franklin Lafayette Perry Warren
George Lamar Pike Washington