Indiana Tax Sale Notices To Mortgagees
December 30, 2011
This follows up my two posts from last year concerning pre-sale notices of Indiana tax sales, which counties hold to satisfy delinquent real estate taxes: (1) Mortgagees Beware: Only Owners Receive Notices of Tax Sale and (2) Indiana Tax Sales, Part II: Redemption. A recent Indiana Court of Appeals opinion – Wells Fargo Bank v. Allen County, 955 N.E.2d 849 (Ind. Ct. App. 2011) –addressed post-sale notice requirements, including where the notices must be sent. These matters are important to lenders/mortgagees because a tax sale can terminate a mortgage lien.
Pre-sale notices. The Court’s opinion teaches us that there are three statutory notices issued by the county. The first relates to the sale itself and was the subject of post (1) above. I.C. § 6-1.1-24-4(a) controls that notice requirement, and it is clear that the initial sale notice only goes to the property owner. In Badawi, the parties did not dispute that the county properly issued the § 24-4(a) notice.
Post-sale notices. Badawi focused upon the post-sale statutory notices required by I.C. § 6-1.1-25-4.5(d) and I.C. § 6-1.1-25-4.6(a), for the right of redemption and for the petition for tax deed, respectively. In addition to the owner, those two notices must be sent to “any person with a substantial property interest of public record at the address for the person included in the public record that indicates the interest,” which includes a mortgagee. I.C. § 6-1.1-25-4.5(d)(2).
Where? In Badawi, the county sent the required post-sale notices to the mortgagee at its local business office and at the address identified on the recorded mortgage. The mortgagee failed to redeem. In an effort to avoid having its mortgage lien extinguished, the mortgagee objected to the county’s petition for issuance of a tax deed, contending that it should have received notice pursuant to the service of process requirements found in Indiana’s trial rules. (See, Service of Process Fundamentals for the Plaintiff Lender.) The mortgagee claimed that the notices should have been served upon an executive officer or a designated resident agent. The Court rejected the mortgagee’s argument:
The sending of tax sale notices is governed by statute, and the fact that the Indiana Supreme Court has set out a different procedure in the trial rules for service of process upon organizations is of no moment. Under both Indiana Code § 6-1.1-25-4.5(d) and § 6-1.1-25-4.6(a)(2), tax sale notices are required to be sent to “any person with a substantial property interest of public record at the address for the person included in the public record that indicates the interest.” Nowhere in the statute does it require compliance with Trial Rule 4.6 when sending tax sale notices.
Practical problem. Badawi is a fairly scary result for secured lenders holding mortgage liens in Indiana. Forbes contributor Peter Reilly noted as much in his November 28 piece. The county sent the notices, and it appears the mortgagee received them. But, from experience, I know that addresses identified in loan documents typically are not addresses of corporate legal departments or of resident agents, which in Indiana are persons or entities specifically designated to process important legal papers and help meet critical deadlines. Evidently, the notices in Badawi slipped through the cracks, and the lender’s mortgage lien was extinguished.
Fixes. My November 16, 2010 post cited to I.C. § 6-1.1-24-3(b), which provides a mechanism for mortgagees to receive pre-sale notices upon submission of written, annual requests to the county auditor. Perhaps every mortgagee doing business in Indiana should make it their New Year’s resolution to send these letter requests. The other solution is to set out, in the mortgage instrument, a contact address designed to deal with legal matters. Also, if you’re an assignee, ensure that you promptly record the mortgage assignment and identify your address on the assignment document. Whatever it takes, mortgagees should be vigilant about real estate tax reconnaissance.