Indiana Tax Sales, Part II: Redemption
November 24, 2010
My November 16, 2010 post discussed how lenders can and should be proactive in monitoring their commercial real estate loan collateral for delinquent taxes and tax sale status. Today’s post addresses what to do upon the “oh no!” moment when the lender learns, after the fact, that a tax sale occurred. Assuming the lender wants to keep its collateral in tact, the lender should exercise the statutory option to redeem as quickly as possible.
Time to redeem. Buyers at Indiana tax sales acquire a super-priority lien on the property for the amount paid. Ind. Code § 6-1.1-24-9. Buyers do not immediately receive a deed. They simply receive a certificate from the County Auditor. The lien trumps any and all other liens, including a lender’s mortgage lien. The lien converts to a deed (title/ownership) after a statutory redemption period. Depending upon the nature of the property and whether the County or a third party was the purchaser, the period can be 120 days or up to a year. Generally, improved commercial property can be redeemed, with a 10% penalty, for up to six months, or for up to a year with a 15% penalty. (I recommend that mortgagees and their counsel study the applicable tax sale statutes, I.C. § 6-1.1-24 and 6-1.1-25, for any specific questions. The statutes are intricate and can be challenging to interpret. I could never address every issue or nuance in one or two blog posts.)
Redemption amount. The amount required for redemption is covered by I.C. § 6-1.1-25-2. Property sold at a tax sale can be redeemed for: the “minimum bid” (meaning the pre-sale delinquent taxes, interest, penalties and sale fees) + a 10% penalty based upon the “minimum bid” + 10% per annum interest on any surplus paid (any amount paid over the “minimum bid”). The 10% penalty becomes a 15% penalty after six months. Note there will be a per diem interest amount if there was a surplus payment, so you’ll need that number to ensure the redemption check is correct. On the other hand, if there was no surplus (a/k/a overbid), then there will be no per diem.
Redemption payee. Redemption checks must be made payable to the County Treasurer and should be certified funds. Upon receipt of the redemption payment, the Treasurer will provide a payment receipt and another official-looking document, sometimes labeled a “Quietus,” that documents the tax sale redemption.
Marion County (Indianapolis) information/guidelines. Marion County’s website, http:\\www.indy.gov, has the following information , written in "plain English," that help explain the statutory procedure with regard to tax sales in Indianapolis:
• Treasurer’s introduction
• Information for current owners of property
• Information for purchasers of tax sale certificates
Again, Indiana statutes applicable to tax sales are clouded and complicated, and I understand that they have been subject to revision fairly regularly over the years. Secured lenders are advised to consult with their Indiana foreclosure counsel in the event they learn that their real estate collateral was unexpectedly sold at a tax sale. Even though there is a grace period to redeem, the clock begins ticking immediately. Ultimately, the lien from the sale can and will result in the issuance of a tax deed (title/ownership), at which point any prior mortgage lien is terminated.