Tax Sales: No Trespassing on Your Own Property

Part of our businesses concerns advising investors (and sometimes wanna-be-investors) on the ins and outs of Georgia Tax Sale property. Every two months or so, a client (investor) will pose a question, "We need to make repairs to the property." Or, "We want to store our equipment for a month or so on the property." Or, "You need to help us get an eviction going, people are living in our tax sale house."

What am I supposed to tell my Tax Sale clients? "Let me call the Court and get the eviction papers."

Unequivocally, "No."

Investors who acquire a Georgia Tax Deed may not go upon the property or take action associated with the property until they have "barred the right of redemption," under Chapter 48 of the Georgia Code.

The granddaddy of all cases (in Georgia) in this area is Elrod v. Groves et al., 116 Ga. 468, 42 S.E. 731 (1902).

"The purchaser has no title to the land until the time for redemption has expired. He has consequently no constructive possession of the premises, and no more right to go upon and make use of them than any stranger to the title would have. His entry upon the premises would be a trespass upon the possession, actual or constructive, of the owner, who might recover against him for any injury committed." Elrod, supra, at 468. [1]

Whitaker Acres, Inc., et al. v. Schrenk, 170 Ga.App. 238, 316 S.E.2d 537 (1984), made clear that the real "owner," not the owner of tax deed could maintain an action for Trespass. [2]

See also, Moultrie v. Wright, 266 Ga. 30, 464 S.E.2d 194 (1995).

"Although the purchaser at a tax sale receives a deed to the property, this tax deed does not vest in the purchaser absolute title to the property. Whitaker Acres, Inc. v. Schrenk, 170 Ga.App. 238, 240(2), 316 S.E.2d 537 (1984). The "title" that the purchaser acquires is subordinate to the right of the defendant in fi. fa. to redeem the property, "and until the expiration of the period which the law fixes in which [the defendant in fi. fa.] might exercise this right [his] title as owner [is] not divested." Morrison v. Whiteside, 116 Ga. 459, 462, 42 S.E. 729 (1902)."

A gray area that tax investors sometimes are bullied into concerns "code enforcement." Notwithstanding the fact that the tax purchaser has no right to go on the land, many of my clients over the years have caved to demands to "cut the grass," and take other remedial action associated with properties. [Don't expect any title company to answer this question; they hate tax deeds. [3]]

One thing that we do advise investors to do is pay the "next," years ad valorem taxes when they come due. If the subsequent years taxes are not paid, the tax sale purchasers are "subordinate" to whoever purchases a future years taxes. Weird but true.

So, if you purchase tax sale in Georgia, wait until you bar the right of redemption; otherwise, whether you like it or not, you may be considered a "trespasser," on your own property.

Hugh Wood
Atlanta, GA


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Wood & Meredith, LLP
3756 LaVista Road
Suite 250
Atlanta (Tucker), GA 30084
www.woodandmeredith.com
hwood@woodandmeredith.com
www.hughwood.blogspot.com
Phone: 404-633-4100
Fax: 404-633-0068

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[1]

ELROD
v.
GROVES et al.
42 S.E. 731
116 Ga. 468
Supreme Court of Georgia.

Oct. 30, 1902.

Syllabus by the Court.
1. The purchaser of land at a tax sale is not entitled to be placed in possession until after the time for redemption has expired.
Error from superior court, Murray county; A. W. Fite, Judge.
Action by D. M. Elrod against W. C. Groves and others. Judgment for defendants, and plaintiff brings error. Affirmed.
COBB, J.
This was a suit upon a sheriff's bond. The petition alleged that the sheriff had levied a tax execution upon a tract of land, and had sold the same in the manner prescribed by law, and that after the sale, and before the time for redemption had expired, the sheriff had ejected the defendant in the tax execution from the premises, and placed the purchaser at the tax sale in possession. It was alleged that this constituted a breach of the bond. The defendants demurred to the petition upon the ground that under the law of this state it was the duty of the sheriff, upon the application of the purchaser at the tax sale, to place him in possession of the property at any time after the sale had taken place and a deed had been delivered. The judge sustained the demurrer and dismissed the case. The plaintiff excepted.
What effect has a tax sale of land upon the title to the property and the right of possession? Is the right of the purchaser to the possession of the property postponed until after the time for redemption has expired? In the case of Jones v. Johnson, 60 Ga. 260, it was distinctly ruled that the rents accruing during the period allowed for redemption belonged to the owner, and not to the purchaser at the tax sale. It is true that that case was dealing with a tax sale had under the provisions of a municipal charter, but the principle in such a case is equally controlling in a case arising under a sale had under the general tax laws of the state. It was said in that case that for a year the purchaser at a tax sale has no absolute title, but a defeasible or conditional title only. In Lamar v. Sheppard, 84 Ga. 561, 567, 10 S. E. 1084, it was said that the owner had a legal right to occupy the premises during the first year after a tax sale without paying rent. While the question as to who was entitled to possession was not directly involved in the case last referred to, it is at least settled by the rulings in the two cases that the owner is entitled to the rents during the time allowed for redemption. If this is true, it would seem to follow that the owner is entitled to the possession during that time. The right to collect rents from one in actual possession necessarily carries with it the right to determine who shall be the possessor during the time for which the rents are collected. If the owner can during the period allowed for redemption place a tenant in possession, certainly the owner can himself be the possessor during that time. Judge Cooley says: "The purchaser has no title to the land until the time for redemption has expired. He has consequently no constructive possession of the premises, and no more right to go upon and make use of them than any stranger to the title would have. His entry upon the premises would be a trespass upon the possession, actual or constructive, of the owner, who might recover against him for any injury committed." Cooley, Tax'n, p. 542 (11). See, also, Black, Tax Tit. §§ 169, 171; 25 Am. & Eng. Enc. Law (1st Ed.) p. 716; Hibbard v. Brown, 51 Ala. 469; Shalemiller v. McCarty, 55 Pa. 186; Mayo v. Woods, 31 Cal. 269; Morrison v. Whiteside (this day decided) 116 Ga. 459, 42 S. E. 729. Our Code provides that the officer selling at tax sales "has the authority to put purchasers in possession of land sold, as in other cases." Pol. Code, § 914. Under the general law of this state, when real estate is sold by the sheriff or other officer, it is provided that the officer conducting the sale may put the purchaser in possession; and ordinarily the purchaser at such a sale acquires the right to be placed in possession *732 by the officer immediately upon paying the amount of his bid, and receiving a deed from the officer conducting the sale. It is argued from this that, under the section of the Political Code above quoted, the purchaser at a tax sale is entitled to immediate possession if he demands it. We do not think this a proper construction to be placed upon that section. Properly construed, that section simply means that the officer selling at a tax sale is authorized to put the purchaser in possession of the land sold in the same manner in which other purchasers at judicial sales are put in possession, whenever such purchaser is entitled, under the law, to the possession of the land. This section does not purport to fix the rights of the purchaser, but simply to give him an appropriate remedy whenever he is entitled to demand possession of the property bought.
Judgment reversed. All the justices concurring, except LUMPKIN, P. J., absent on account of sickness.

[2]

" 'To maintain an action for trespass or injury to realty, it is essential that the plaintiff show either that he was the true owner or was in possession at the time of the trespass.' [Cits.]" Coffin v. Barbaree, 214 Ga. 149, 151, 103 S.E.2d 557 (1958). "[The] true owner (that is, the person holding the legal title) may maintain an action of trespass, though he was not in possession at the time the wrong was committed; but ..., the burden is upon him to show
Page 539 that he is the true owner; and this he can do only by showing title. [Cits.]" Gaskins v. Gray Lumber Co., 6 Ga.App. 167, 168, 64 S.E. 714 (1909). Thus, the issue for resolution in the instant case is who was the "true owner" of the unoccupied property at the time the alleged damage occurred.

It is true that the purchaser at a tax sale receives a deed to the property. OCGA § 48-4-6. However, it is also clear that this tax deed does not represent the purchaser's absolute title to the property. "While under the law of this State, where property is sold for taxes, the officer making the sale executes a deed to the purchaser before the time for redemption has lapsed, yet the title acquired by such purchaser is not a perfect fee-simple title, but an inchoate or defeasible title, subject to the right of the owner to redeem within the time prescribed by the statute." Bennett v. Southern Pine Co., 123 Ga. 618(1), 51 S.E. 654 (1905). "The nature of the title which he has may be compared to an estate which will ripen upon a condition, or rather perhaps to one which will be defeated upon the happening of a condition. In either event, it is not a perfect title, but one subject to the right of redemption." Bennett v. Southern Pine Co., supra at 622-623, 51 S.E. 654.

Moreover, it is clear that whatever "title" the purchaser at a tax sale may acquire, it is "in subordination to [the] right of [the owner to redeem his property], and until the expiration of the period which the law fixes in which [the owner] might exercise this right [his] title as owner [is] not divested." (Emphasis supplied.) Morrison v. Whiteside, 116 Ga. 459, 462, 42 S.E. 729 (1902). The purchaser at a tax sale "is not entitled to possession, or to rents, issues, and profits during the time allowed for redemption." Bennett v. Southern Pine Co., supra 123 Ga. at 622, 51 S.E. 654. " 'He has consequently no constructive possession of the premises, and no more right to go upon and make use of them than any stranger to the title would have. His entry upon the premises would be a trespass upon the possession, actual or constructive, of the owner, who might recover against him for any injury committed.' [Cits.]" (Emphasis supplied.) Elrod v. Groves, 116 Ga. 468, 470, 42 [170 Ga.App. 241] S.E. 731 (1902).

If, prior to the expiration of the time for redemption, the owner's title is not divested and the purchaser himself may be considered a trespasser on the premises, it logically follows that the owner cannot be said to lack standing to sue for a trespass which occurs during this period. The owner has "the right to determine who shall be the possessor" before the expiration of the redemption period. Elrod v. Groves, supra at 469, 42 S.E. 731. Accordingly, we find that appellee had sufficient standing to recover for a trespass to the property. Whitaker Acres, Inc., supra, at 240 - 241.

[3]

Title Ins. Companies Hate Tax Deeds.

1.
Title to the estate or interest described in Schedule A being vested other than as stated therein;
The first paragraph of the owner's policy generally states the coverage provided. Subject to the Exclusions from Coverage, the Exceptions contained in Schedule B, and the provisions of the Conditions and Stipulations, the insurer insures the insured against loss or damage that the insured shall sustain by reason of three (Form A) or four (Form B) areas of affirmative coverage stated in the policy. This first area of affirmative coverage provides that the insurer will reimburse or indemnify the insured for loss sustained by reason of the fact that the title to the estate or interest that is described in Schedule A is not vested as stated in Schedule A of the policy, subject always to the Exclusions, Exceptions, and Conditions and Stipulations. In Schedule A, the title insurance company will describe the estate or interest that the policy covers and will specify in whom the title to such estate or interest is vested. See §3.49 below. In the event the company errs in describing the manner in which title to the estate or interest described in Schedule A is vested, and if the insured sustains a loss by reason of the title being vested otherwise than as stated, then, subject to the Exclusions, Exceptions, and Conditions and Stipulations, the title insurer will reimburse the insured. Generally speaking, it should be a relatively simple matter for the title insurance company to ascertain in whom the title to the estate or interest described in Schedule A is vested. Of course, 100-percent failures of title do occur. A 100-percent title failure would occur if the estate or interest described in Schedule A is that of fee simple absolute and the title insurer names as the individual vested with such title someone other than the owner. This could happen, for example, when a valid tax deed has been issued to other than the insured but the title insurance company personnel failed to pick up the tax sale or tax deed proceedings in the title search. As a result, the title insurer may issue a policy to the record owner, insuring fee simple title in him, when, in fact, the grantee named in the tax deed is the fee simple title holder. Since title to the estate or interest described in Schedule A would be vested otherwise than as stated therein, the title insurer would, subject to the other limitations of the policy, be liable to indemnify or reimburse the insured for loss sustained as a result of the error. More typical situations involve those in which an undisclosed heir may have an undivided fractional interest in the fee simple title that is not taken into account in Schedule A of the policy. Title may also be "vested other than as stated" by reason of adverse possession. See, e.g., Laabs v. Chicago Title Insurance Co., 72 Wis.2d 503, 241 N.W.2d 434, 438 (1976). Generally speaking, other areas of coverage afforded by the policy result in greater losses to the title insurance industry than are occasioned by coverage afforded in this paragraph. The ALTA Owner's Policies :: SingleSource not updated after July 2007

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