Introduction to What Survives with a Tax Lien, and Can You Mitigate Them? –With Scott Walterbach of Bessine Walterbach
Brian Seidensticker, CEO of Tax Sale Resources, recently invited Scott Walterbach to another podcast to discuss what survives a tax sale and what can be done to mitigate those liabilities. Walterbach is a partner at the Missouri law firm Bessine Walterbach LLP and has more than 16 years of experience with tax sales law.
The Big Four Items That Typically Survive a Tax Lien
The first thing to know is that if you acquire a tax sale deed, that doesn’t include any warranties on the title. Generally, four categories of things are not stripped away from the deed through the tax sale process. Those are 1) taxes subsequently due after the tax sale, 2) valid and recorded covenants that stay with the land (such as HOA restrictions), 3) easements of record (such as public sidewalks), and 4) easements of use (such as driveways).
What Happens to Federal Liens?
Also, if you bid on a property in most counties and win the auction, you may later find that HUD has a lien, which is challenging to mitigate. The same may apply to many other federal liens, although Missouri state law is still ambiguous, and the courts must clarify their position. But, generally speaking, federal liens will be harder to remove. Those are usually defended in federal court by highly experienced attorneys well-versed in the applicable statutes. That can make the process more challenging for investors and make it less likely that they will prevail and receive a favorable judgment.
Good News about IRS Liens and Notification
However, you can mitigate IRS liens by providing adequate notification to the Internal Revenue Service. As always, it is important to notify all lienholders and make them aware that you purchased your certificate during the tax sale. That must be done during the redemption period to give them a sufficient opportunity to respond. In Missouri, the redemption period is one year from the tax sale date.
Other Things to Think About in Regards to Mitigation
The Missouri legislature does have the authority to put certain items on par with tax liens, in which case those would survive the tax sale. Examples include designated transportation and neighborhood improvement districts or liens for services considered vital to the health and well-being of the community, such as sewer services. Walterbach also pointed out that sometimes municipalities will place liens on a property to get reimbursed for what is known as “weed abatement.” That refers to having the property mowed. They’ll often charge rather exorbitant prices and assess extraordinary fines for unpaid weed abatement reimbursement. But those are usually not enforceable against investors who hold tax lien certificates. After all, they have no ownership rights during the redemption period and no legal right to go onto the property and do any abatement activity. So, you can expect those liens to be stripped away once you foreclose and take ownership.
The Bottom Line on What Survives Tax Liens
Liens and encumbrances may survive the tax sale because of state or federal statutes, so deed investors should consult a knowledgeable local attorney to learn more about them and how to handle them. Listen to the full podcast to hear the entire in-depth conversation between Walterbach and Seidensticker.
