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

It seems inconceivable, especially in a judicial foreclosure state such as Florida, that a mortgagee and its foreclosure firm could complete a foreclosure  and actually cause the homeowner to be physically removed from a property other than the property pledged by the mortgagor and covered by the mortgagee’s mortgage or Deed of Trust, without someone discovering the error.

Adams & Edens and other foreclosure firms have procedures and checks and balances  in place to ensure that the property intended as collateral for a loan is the property described in the mortgage or Deed of trust and is the property actually foreclosed upon.   Thorough loan document review and pre-foreclosure title review and examination are key to discovering “mix-ups” with property ownership / identities.

In short, the central purpose of Title VII of the Act is to provide innocent tenants, whose landlords have lost properties to foreclosure, with additional time within which to secure alternative housing arrangements.  A thorough statement as to the purpose, import and impact of the Act can be found in a recent Federal Register Notice from the Department of Housing and Urban Development (”HUD”) and in a summary of Senate Bill 896.  [Source www.thomas.gov]

Purchasers of foreclosed properties must be aware of the ninety (90) notice requirement and additional rights extended to tenants under the act, including but not limited to the right of certain tenants to continue leasing the property from the new owner(s), and must implement sufficient processes to ensure compliance with the Act.  Over the course of the past weeks and months since the enactment of this law foreclosing lenders and servicers and attorney firms have implemented varying practices and procedures for ensuring compliance.  Due to the “unknowns” associated with the Act, the process is continually evolving.