Liens and Mortgages on Tax Deed Property
Tax Deed Properties in Arkansas
What happens to the Liens and Mortgages on Tax Deed property in Arkansas?
Mortgages, Judgments, or other encumbrances
The Commissioner of State Lands (COSL) attempts to provide notice to all interested parties that have been identified and made known to him. If the interested party receives proper notice of a sale but fails to protect its interest by redemption of the taxes, that interest may be extinguished. Generally, mortgage holders will redeem the taxes to protect their interests if they are given proper notice of the sale.
City Liens, Improvement Districts, Property Owner’s Fees
Some liens and encumbrances held by municipalities may not be extinguished, even if proper notice was given. Watch for liens from the city and improvement districts. Property owners associations (POAs) and home owners associations (HOAs) fees usually transfer with the property, as well.
It is not uncommon for tax delinquent (tax deed) properties to be saddled with liens by the Internal Revenue Service (IRS). Federal law provides some protection from tax sales to the IRS, so do not expect these liens to be automatically extinguished. Buyers should contact the IRS for information on how to satisfy or remove these liens.
Notice Not Guaranteed
The Commissioner does not always have access to information that identifies all possible lien-holders or interested parties. It is important that each potential buyer perform their own due diligence and research prior to purchasing a tax delinquent property.
If the property sells for more than the amount of taxes owed, excess funds may be paid to former deed holder. Former deed holders and lien holders should contact the Commissioner of State Lands to see if any excess funds are available after the parcel has sold. These funds are not automatically paid out, so ask the Commissioner how to request payment, if excess funds are available.
During and After the Sale
The Commissioner of State Lands (COSL) advises buyers and investors to seek legal consultation in order to establish stronger title to properties purchased through a tax sale. The Commissioner does not and cannot guarantee title to these properties.
In most cases, buyers of tax delinquent land will need to obtain a decree of confirmation and quiet title before a title company will issue title insurance for the property. Purchasers of tax delinquent land should be prepared to pay these additional expenses in order to gain clear title to their tax deed property.
To Confirm and Quiet Title
Establishing a clear title to properties purchased through tax sales is accomplished by filing a Complaint to Confirm and Quiet Title. This is a complex legal process consisting of an action filed with the County Circuit Court where the property is located. Arkansas state law has very specific requirements for these types of actions. Please consult an Arkansas Real Estate attorney who has experience in this area to assist you with confirming the title to your tax deed properties.
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Published on: Jul 20, 2015
Last updated: February 17, 2018 at 12:17 pm
If you have purchased tax delinquent (tax deed) property in Arkansas and need legal assistance to confirm or quiet your title, please contact Deborah at The Hardin Law Firm, PLC.
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DISCLAIMER: The information contained in this web site is intended to convey general information. It should not be construed as legal advice or opinion. It is not an offer to represent you, nor is it intended to create an attorney-client relationship. Laws and procedures can and do change. You should consult a real estate attorney licensed in your area.