Who Owes The Taxes After An Indiana Tax Sale, And When?
April 17, 2019
Lesson. As a tax sale buyer, be prepared to pay the real estate taxes that accrue in the year of the sale.
Case cite. Picket Fence v. Davis, 109 N.E.3d 1021 (Ind. Ct. App. 2018) (pdf)
Legal issue. Whether a tax sale buyer owes real estate taxes that accrue in the year of the sale.
Vital facts. The following chronology is important:
10/26/15: Treasurer’s Tax Sale
(The subject property did not sell because there was no “minimum bid.” Thus, the County acquired a lien on the property.)
4/8/16: County Commissioners’ Certificate Sale
(The property “sold,” meaning that the buyer purchased a “certificate” for the property.)
8/22/16: Petition for Tax Deed
(Following the submission of the required statutory notices, the buyer sought a court order for the issuance of a tax deed.)
9/26/16: Order for Deed
(The trial court directed the County to execute and deliver a tax deed to the buyer.)
Procedural history. Following the order for deed, a dispute arose between the buyer and the County regarding whether the buyer was responsible for real estate taxes accruing on or after January 2015, the year of the Treasurer’s Tax Sale. The trial court ruled in favor of the County. The buyer appealed.
Key rules. Indiana counties assess taxes each year, but those taxes do not become due and payable until May and November of the following year. For example, if in 2019 the Boone County Assessor determines that my wife and I owe $1000 in taxes for our home, the Boone County Treasurer will not collect the $1000 until 2020 (May, $500 and November, $500).
Another Indiana tax sale feature illustrated by Picket Fence is that, if a property does not initially sell for a statutory minimum amount, then the property slides to the county for a second tax sale, which does not require a minimum bid. The Court’s opinion describes this process in detail and includes summaries of the testimony of two experts that testified in the case.
The Indiana Court of Appeals rightly focused on the provisions in the tax sale statute [Indiana Code 6-1.1-25-4(f) and 4(j)] that specifically dealt with the payment of taxes by a sale purchaser. The Court explained why the “sale” referenced in those subsections refers to the Treasurer’s Tax Sale, and not the County Commissioners’ Certificate Sale, as it relates to when taxes should be payable by the new owner.
Holding. The Court of Appeals affirmed the trial court’s decision and concluded that the buyer must pay the real estate taxes that accrued the year of the Treasurer’s Tax Sale, including the taxes that accrued before the date of the County Commissioners’ Certificate Sale.
Policy/rationale. The buyer in Picket Fence argued that he should not be on the hook for the 2015 taxes due in 2016 or the first installment of the 2016 taxes due in 2017. The rationale for the buyer’s argument was that he did not actually become the owner until 2016. The County, on the other hand, asserted that the operative “sale” was the Treasurer’s Tax Sale in October of 2015 and that the buyer was thus obligated to pay the taxes that accrued in 2015. While I’m not entirely sure what’s ultimately fair here, the Court properly zeroed in on the key statutory sections and logically followed the language as written by the legislature. Of perhaps some solace to the buyer was that he did not owe any taxes due and payable in 2015 (the 2014 taxes). He only owed taxes that accrued in 2015, payable in 2016.
Mortgage loan servicers and title insurance companies sometimes engage me to handle tax sale-related disputes. If you need assistance with a similar matter, please call me at 317-639-6151 or email me at email@example.com. Also, don’t forget that you can follow me on Twitter @JohnDWaller or on LinkedIn, or you can subscribe to posts via RSS or email as noted on my home page.