Tax Sales - November 2014
Title Tips by Joe Vitullo
TAX SALES are often seen in real estate title examinations. A tax collector may sell real estate under a property owner's name for up to three years after it has been sold or alienated from the owner (R.I.G.L. 44-9-1(b)). Technically, for this reason, all property owners' names should be run for three (3) years after they voluntarily or involuntarily alienate the property. The tax lien lasts indefinitely so long as the owner retains title to the parcel, but is extinguished three (3) years after alienation. The tax lien does not expire where the title is alienated by operation of law as in the case of a devise in a will or by descent in an intestacy Rathbun v. Allen 63 R.I. 109 (1939).
Under the Rhode Island tax sale system, a tax collector's deed is "...in the nature of an independent grant from the sovereign which bars or extinguishes all former titles", interests and liens not specifically excepted Picerne v. Sylvestre 113 R.I. 598 (1974). Unlike neighboring Massachusetts where the tax sale results in the purchase of a lien in the sold property, the tax title in Rhode Island is absolute and subject only to the taxpayer's right of redemption. Any person having an interest in land sold for non-payment of taxes, or his or her heirs or assigns, may redeem the land by paying the delinquent taxes and penalties specified in R.I.G.L. 44-9-19. The right of redemption lasts indefinitely or until a Petition to Foreclose the right of redemption has been filed in Superior Court. Tax sales are generally uninsurable for a period of forty (40) years at which time they can be insured under the Marketable Record Title Act (R.I.G.L. 34-13-1).
Redemption by a taxpayer restores the owner to the same position he or she was in before the tax sale, along with any liens and encumbrances to which the title was subject. Whether the redemption is accomplished by the recording of a tax collector's Certificate of Redemption or by a Redemption Deed from the tax sale purchaser, the redemption does not result in the creation of a new title in any other person Pratt v. Wooly 117 R.I. 154 (1976). Neither the person named in any Certificate of Redemption nor any Redemption Deed acquires any title to the parcel being redeemed. Redemption Deeds are not a conveyance of title, which is why they recite that no R.I.G.L. 44-30-71.3 withholding is required.
Naturally, one way to avoid the possibility of a tax sale in a title is to obtain and record a Municipal Lien Certificate under R.I.G.L. 44-7-11 within sixty (60) days after its date. The certificate, when recorded, discharges the subject parcel from the lien for all tax assessments, rates and charges which do not appear on its face. The certificate must also state whether a tax sale has been scheduled or whether the taxes have been paid as a result of a tax sale within the past twelve (12) months. Motor vehicle taxes are not a lien on real estate.
In order to hold a tax sale, the tax collector must comply with numerous notice provisions and must execute and record a tax deed within sixty (60) days of the tax sale auction under R.I.G.L. 44-9-12. Otherwise the sale is void. The deed must recite the cause of the sale, the price for which the land was sold, the places where the notices of sale were posted, the name of the newspaper in which the notice of sale was published and the residence of the tax sale purchaser. The tax collector is not looking for the highest bidder, he is required to sell the smallest undivided portion which brings the municipality the money due to it and he may sell the whole only in the event no person offers to take a smaller portion. Picerne v. Sylvestre 113 R.I. 598 & R.I.G.L. 44-9-8. If the town purchases at a tax sale, it may assign its tax title to any person after giving notice to the original owner R.I.G.L. 44-9-18.
R.I.G.L. 44-9-25 prohibits the holders of a tax sale from filing a petition to foreclose the taxpayer's right of redemption until after one year from the date of the tax sale. During the first year after a tax sale, a taxpayer, or any person having an interest in the land, may obtain a Certificate of Redemption from the Tax Collector and, upon redeeming the same, restore the title. After one year, the person redeeming must obtain a Redemption Deed from the successful bidder at the tax sale. If a Petition to Foreclose the right of redemption has been filed in Superior Court, the taxpayer or interested party must answer the case and offer to redeem (R.I.G.L. 44-9-29). At the time of filing the Petition to Foreclose, the successful tax sale bidder must record a Notice of Filing in the Land Evidence Records where the land lies (R.I.G.L. 44-9-32). If the Court allows the Petition, a Notice of Final Disposition is recorded.