Understanding Tax Sale and Quiet Title in Louisiana
Every property owner is required to pay property taxes, and if they don’t, the parish tax collector (usually the sheriff) may sell the property at a tax sale to satisfy the unpaid debt. (LA R.S. 47:2153)
How do tax sales work?
Tax sales generally occur annually (usually June). First, the parish tax collector publishes a list of delinquent properties for sale through the local newspaper as well as online. The property is then sold at a public auction for a flat fee consisting of the amount of taxes due on the property, plus interest and costs for the advertisement and sale of the property.
Purchasing a property through a tax sale
Many investors choose to obtain property through a tax sale in an attempt to “get a deal.” However, purchasing property at a tax sale only gives the purchaser a “tax deed.” A tax deed gives the purchaser a “tax sale title,” but does not automatically give the purchaser the right to use or possess the property. A tax purchaser may only exercise possession of the property if he or she can do so without resistance by the original owner. For example, if you purchase a home at a tax sale that is occupied, you may only occupy it if you engage the courts to evict the occupants. The tax sale purchaser is required to maintain the property and pay the required taxes.
A tax sale gives the original property owner three years to redeem their property. To redeem the property, the owner has to pay the purchaser of the tax title the price paid at the tax sale; all taxes paid on the property since the tax sale; a 5% penalty; and 1% interest per month. The original owner must also pay the parish tax collector for the transaction costs related to the redemption. The redemption period is reduced from three years to 18 months if the property is blighted or abandoned.
If the original owner does not redeem the property in three years from the filing of the tax sale certificate, the new purchaser may file a lawsuit to “quiet the title” to obtain full ownership. (LA R.S. 47:2266) In simple terms, the purchaser sues the former owner for ownership. The suit is filed in the parish where the property is located (if it is located in more than one, then either parish). The original owner has six months after the date of service to institute a proceeding to annul the tax sale. If the original owner fails to do so, judgment shall be rendered quieting and confirming the title, and the full ownership of the tax sale purchaser.
If it has been five years since the tax sale, title may be quieted by obtaining a judgment of the court in the parish where the property is located. The only difference is the original owner has ten days instead of six months to respond with a suit to annul the tax sale. The petitioner must file a notice of lis pendens with the recorder of the mortgages of the parish in which the property is located so that any subsequent mortgage, lien, transfer or encumbrance filed after the notice shall not affect the property.
Investors should be careful when obtaining property this way. While a sheriff’s sale is the last step in the foreclosure process, the property may be subject to outstanding liens at the state or federal level. This means that any pre-existing liens on the property that were not cleared during the foreclosure due process may become the new owner’s financial responsibility. Therefore, it is always in the best interest of the purchaser to obtain owner’s title insurance.
If you want to learn more about tax sale and quiet title in Louisiana or have questions about any of our services, call TitlePlus today at (225) 709-3500.