Lesson. A tax sale purchaser may not obtain a tax deed if the statutory redemption notice inflates the redemption amount. Such notices should not include any overbid/surplus funds as being required for redemption.
Legal issue. Whether tax sale purchaser’s post-sale statutory redemption notice substantially complied with Indiana law despite erroneously including purchaser’s overbid amount.
Vital facts. Tax sale purchaser (“Purchaser”) timely sent the post-sale statutory redemption notice to the owner/tax payer (“Owner”). This is sometimes referred to as the “4.5 Notice” based upon the relevant statute. Owner did not redeem the property from the tax sale. The contents of the 4.5 Notice were at issue in McIntosh. Purchaser bought the tax sale certificate for $8752.00, which included an overbid (surplus) amount of $4679.29. The 4.5 Notice erroneously listed the overbid as a component of the redemption amount.
Procedural history. Purchaser filed a petition for tax deed, and Owner objected. After a hearing, the trial court denied the petition, and Purchaser appealed.
Key rules. The Indiana Court of Appeals summarized the tax sale process:
the sale proceeds first satisfy the property tax obligation for the property, then satisfy certain other qualifying tax obligations of the property owner, with any surplus going into the Surplus Fund. In other words, the Surplus Fund is comprised of the overbid. The Surplus Fund may also be used to satisfy taxes or assessments that become due during the redemption period. Finally, if the property is redeemed, the tax-sale purchaser has a claim on whatever is in the Surplus Fund, and, if a tax deed is issued, the original owner does.
A 4.5 Notice arises out of Indiana Code 6-1.1-25-4.5. The notice must include, among other things, “the components of the amount required to redeem” the property from the sale. Indiana Code 6-1.1-24-6.1(b) details those components. The overbid/surplus is not one of the components.
Holding. The Court affirmed the denial of the petition for tax deed but remanded the case with instructions for the trial court to order a new 120-day redemption period with a new 4.5 Notice.
Policy/rationale. The trial court found that the 4.5 Notice “greatly overstated” the redemption amount. The Court of Appeals agreed that the notice “would have led a reasonable person to conclude that the total redemption amount was far greater than it actually was….” The Purchaser made a number of arguments in support of its theory that the 4.5 Notice substantially complied with the applicable statutes and was not inaccurate. However, the Court rejected the Purchaser’s position and reasoned that the notice “asked [Owner] to jump through too many hoops to discover the true redemption amount, a situation that only existed because [Purchaser] - misleadingly and without justification – included the overbid in the first place.”
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