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Rhode Island Legal Blog

Wednesday, August 22, 2012

Tax Lien Sales in Rhode Island

Going once, going twice... SOLD!

Buying real estate at municipal tax lien sales in the state of Rhode Island can be an exciting way to invest in Rhode Island real estate.  Like all investments, it of course does not come without risk.  The Law Offices of Richard Palumbo regularly represents the buyers of real estate at tax lien sales.  Before buying real estate at tax lien sales it is important to learn about the entire process.  The prudent investor will investigate the title of any property that the buyer is going to attempt to purchase.  It is also advisable to research the property prior to bidding.

What happens at a Rhode Island tax lien sale?

There are different types of tax lien sales in Rhode Island.  There are 39 municipalities (cities or towns) in the state of Rhode Island.  There are 8 incorporated cities (Providence, Cranston, Warwick, Central Falls, East Providence, Newport, Pawtucket and Woonsocket).  There are 31 Towns in the state of Rhode Island.  All of the 39 cities and towns in Rhode Island periodically (i.e. annually) hold tax lien sales for un-paid real estate property taxes.  When an owner of real estate becomes delinquent in the payment of their real estate taxes, the municipal government at some point will advertise and sell the tax lien at a tax lien sale.  There are also municipal water, sewer and fire district tax lien sales in the state of Rhode Island.  You should contact the individual cities and towns, water departments and sewer departments to obtain the dates of the next tax lien sales.  You should be able to obtain a list of properties that are being sold at the next tax lien sale.  All of the tax lien sales are also advertised in the Providence Journal or other newspapers.  Every bidder at a tax lien sale is given a form as required by Rhode Island general law.  The real estate is generally auctioned-off or sold in the order that the property appears on the tax sale list.  The tax sale bidder's registration form will require some information including whether or not you are a Rhode Island resident.  This form must be signed and notarized.  Proper identification may not be needed to excercise one's right to vote but proper identification will be required to buy property at a tax lien sale.

The minimum bid at the tax lien sale cannot be less than the total amount to redeem the property, plus costs associated with offering the parcel for sale.  Often, aggressive bidders will bid down (i.e. full price purchase for a 1% interest in the lien).  All payments must be either cash or cashier’s check.

How can I find properties that are on the tax sale list?

The properties that are going to be sold at a tax sale in Rhode Island are advertised prior to the tax sale.  Most municipalities also have property lists available to the general public.  The water departments and sewer departments should also have lists available.  Plat maps and field cards can be located in the Town Assessor’s Office.

Will I get a tax lien when I buy at a tax sale?

Yes, you will get a tax collector’s deed subject to the right of redemption.  The right of redemption is the owner’s right to redeem the property by paying the taxes, costs, expenses and interest.  After the right of redemption is foreclosed in Rhode Island Superior Court, all previous title rights are extinguished, and you own the property free and clear.  There are however, liens that may survive the foreclosure sale.  For example, liens filed by governmental agencies in relation to the environmental protection act will survive the foreclosure sale.  If the Internal Revenue Service (IRS) has not been properly noticed regarding property on which the IRS has placed a lien, such IRS liens will survive the foreclosure process.  Also, the Tax Collector has the right to cancel the sale up to the time of the sale.

How long will it take to get my tax deed?

Deeds are typically executed by the Tax Collector and recorded with the register of deeds or land evidence records within 60 days after the date of the tax sale.  You should be able to pick-up the deed but most often the municipality will mail you the deed.

How about back taxes or other costs?

That is a great question.  Buyers at tax sale auctions are responsible to pay all of the municipality’s outstanding taxes; as well as subsequent years.  The buyer is responsible for any special assessments; interest on the taxes; legal costs and charges incident to the sale.

What happens after the sale?

After you bid, pay and receive your deed the prior owner has one year to pay and redeem the property.  The successful bidder generally receives their purchase money and statutory interest on their purchase price if the owner redeems within the first year.  If the owner does not redeem within the one year period then our office can represent you to foreclose the right of redemption.  This is a lengthy process that has a number of potential outcomes.  It is best described by Rhode Island General Law § 44-9-25. Petition for foreclosure of redemption that states:

“(a) After one year from a sale of land for taxes, except as provided in §§ 44-9-19 -- 44-9-22, whoever then holds the acquired title may bring a petition in the superior court for the foreclosure of all rights of redemption under the title. The petition shall set forth a description of the land to which it applies, with its assessed valuation, the petitioner's source of title, giving a reference to the place, book, and page of record, and other facts as may be necessary for the information of the court. Two (2) or more parcels of land may be included in any petition brought by any purchaser of a title or titles, if the parcels are in the same record ownership at the time of bringing the petition (Form 5).

(b) No more than one foreclosure petition may be filed for each tax deed regardless of the number of tax title holders having an interest under such deed. If more than one petition is filed, the petitions shall be consolidated for hearing by the court. The court shall not award more than one attorneys' fee to the petitioners.

(c) Notwithstanding the provisions of subsection (a) of this section, no petition for foreclosure of redemption shall be filed or entertained by any court with respect to any property or title acquired by the Rhode Island Housing and Mortgage Corporation pursuant to § 44-9-8.3 of the general laws until after five (5) years from the sale of said property or title for taxes.

1. IN GENERAL.

The general rule is that both the right of redemption of the delinquent taxpayer or those claiming under or through him and the rights of the tax sale purchaser are to be determined by the laws in force at the time of sale and this act is applicable to a sale in 1950 of land for taxes for the years 1936-1949. Town of Jamestown v. Pennsylvania Co. for Banking & Trusts, 101 R.I. 274, 221 A.2d 821 (1966).  In a proceeding to foreclose redemption rights the superior court may hear only claims related to those rights, and the court therefore could not cancel the tax purchaser's promissory note on the property sought to be redeemed. Pratt v. Woolley, 117 R.I. 154, 365 A.2d 424 (1976).

2. FILING PETITION.

Following the expiration of the one-year period subsequent to the tax sale of the realty, whoever holds the tax title may bring a petition in the superior court to foreclose all rights of redemption thereunder. Picerne v. Sylvestre, 113 R.I. 598, 324 A.2d 617 (1974).

3. JURISDICTION.

A hearing court entertaining a petition to foreclose rights of redemption may only consider matters that the tax statute specifically empowers him to hear and may not invoke his equitable jurisdiction to fashion remedies for the parties. Phoenix J. Finnegan v. Bing, 772 A.2d 1070, 2001 R.I. LEXIS 151 (R.I. 2001).

4. VALIDITY OF SALE.

One year limitation period applied to redemption proceeding and did not bar an action attacking validity of sale though not filed within one year after sale. Struthers v. Potter, 30 R.I. 444, 75 A. 867 (1910).

5. RES JUDICATA.

Even though there was an identity of parties and the superior court previously granted a default judgment against the plaintiff on the issue of whether the plaintiff had a right-of-redemption on a particular piece of property, res judicata did not bar the plaintiff from relitigating this matter in a separate lawsuit, since notice for the initial suit was defective and, hence, the initial default judgment was void. Such a void judgment does not preclude, therefor, the plaintiff's subsequent lawsuit to enjoin the defendants from enforcing their default judgment. Gaudreau v. Blasbalg, 618 A.2d 1272 (R.I. 1993).

6. POSSESSION.

There is no requirement that the purchaser take possession before laying claim to the real estate purchased at a tax sale. Picerne v. Sylvestre, 122 R.I. 85, 404 A.2d 476 (1979).

7. ADVERSE POSSESSION.

A tax-sale purchaser and his successors in interest may extinguish the right of redemption by adverse possession if that possession continued for the statutory period of 10 years. Sleboda v. Heirs at Law of Harris, 508 A.2d 652 (R.I. 1986).

8. DUE PROCESS.

Where defendants city tax collector and tax sale purchaser partners appealed an order of the bankruptcy court that held the Tax Sales Statute, R.I. Gen. Laws, § 44-9-1 et seq. was unconstitutional in failing to provide notice of the right of redemption, depriving the debtor of due process under the Fourteenth Amendment, the district court upheld the bankruptcy court's order; under the Rhode Island scheme, requiring notice of the right of redemption until the end of the tax sale process under R.I. Gen. Laws § 44-9-29 effectively deprived the debtor of the right of redemption itself. Pontes v. Cunha (In re Pontes), 310 F. Supp. 2d 447, 2004 U.S. Dist. LEXIS 5227 (D.R.I. 2004).  Court granted the mortgagors' motion for judgment on the pleadings in which they sought a decree setting aside the tax sale and the subsequent decree foreclosing equity of redemption because the complete lack of notice to the mortgagors of the tax sale and petition to foreclose redemption was both substantial and misleading in violation of state law governing tax sales, R.I. Gen. Laws § 44-9-35, R.I. Gen. Laws § 44-9-11. Burns v. Conley, 526 F. Supp. 2d 235, 2007 U.S. Dist. LEXIS 81679 (D.R.I. 2007).”

 

The author of this article, Richard E. Palumbo, Jr., managing attorney of the Law Offices of Richard Palumbo, LLC whose practice focuses on Real Estate and Business Law including the following; Residential and Commercial Real Estate Closings (Purchases, Sales and Refinancing); Title Searches; Title Insurance; Title Defense Litigation; Quiet Title Actions; Purchase and Sales Agreement Litigation; Adverse Possession Litigation; Boundary Line Disputes and Easement Litigation; Foreclosure of Right of Redemption of Tax Liens; Partition in Kind and Sale Litigation; Mortgage Foreclosures; Condominium Law (New Projects, Conversions, Drafting and Re-Drafting of Condominium Documents; Developer – Declarant Representation, Association Representation, Assessment Collections and Condominium Lien Foreclosures, Dispute Resolution and Litigation); Residential, Commercial, Industrial, Telecommunication and Ground Lease Negotiation and Drafting; Residential and Commercial Landlord Tenant Law (Evictions for Non-Payment of Rent, Termination of Tenancies, Eviction for other than Non-Payment of Rent); Real Property Insurance Loss Assessments, Settlements and Litigation for Insured Owner’s of Residential and Commercial Property; Business Representation and Formations and  Real Estate and Business Litigation; Purchases and Sales of Business and Business Assets; Commercial and Business Litigation; Receivership Law; and Probate Law. 

 

 


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