Bulletin: GA2008003

Dear Associates:

The insurance of a purchaser at a tax sale or where the examination of title reveals a recent tax deed, even when insuring a bona fide purchaser, is an extra-hazardous risk for title insurance companies. Such sales are susceptible to judicial attack which may result in the deed being voidable or void. This Bulletin will address the Company's requirements for insuring transactions and clearing the title from the effects of tax deeds in Georgia.

What is wrong with tax titles? In Georgia, the purchaser at a sale for taxes acquires defeasible title, subject to the right of redemption. While the tax sale purchaser receives a tax deed to the property, they cannot take immediate possession of the property, make any improvements to the property, evict any tenants, or move onto the property. Georgia law allows the property owner or anyone with any right, title or interest in the property to repurchase (redeem) the property. Upon the exercise of the right of redemption, title to the property is conveyed back to the owner of record subject to all liens that existed at the time of the tax sale. However, until the right of redemption has been foreclosed, a tax deed has the same force and effect as a lien. O.C.G.A. §48-4-48. Even after the equity of redemption has been barred, title can still be challenged on various grounds, including the following:

1. Excessive Levy;
   
2. Deceased or Incompetent Defendants;
   
3. Void Legal Description;
   
4. Improper or defective form of notice of levy;
   
5. Improper or defective form of notice of issuance of execution;
   
6. Improprieties or irregularities in connection with the time, place and manner of sale;
   
7. Prior to the sale the judgment debtor had become a debtor under the Bankruptcy Act provisions;
   
8. Intervening liens on other interests, if any, may not be extinguished by the sale due to lack of satisfactory notice to the holder of intervening liens or other interests;
   
9. Notice given to the owner may not comply with due process unless personal service has been given.

Georgia Tax Foreclosure Sales Under the traditional non-judicial tax foreclosure procedure, the property owner(s), creditors, or any person having an interest in the property may redeem (repurchase) the property from the holder of the tax deed within 12 months. O.C.G.A. §48-4-48. The purchaser at the tax sale may terminate or foreclose on the owner's right to redeem the property by service and publication of the required notices of foreclosure after more than 12 months has lapsed from the date of the tax sale. While the Georgia Code does contain additional provisions for tax titles to ripen into ownership by prescription, extreme care must be exercised in this area. Company Policy: Stewart Title does not insure titles based only on adverse possession unless the property has been occupied by the owner for more than 20 years since the tax sale. No title insurance policy should be issued where the basis of ownership is adverse possession unless the Issuing Agent secures Stewart Underwriter approval.

In 1996, the Georgia General Assembly established an alternative to the non-judicial tax foreclosure procedures whereby a municipality may enact an ordinance or resolution which will authorize the use of judicial in-rem tax foreclosures for delinquent municipal taxes. O.C.G.A. §48-4-75 through 48-4-81. Under this system, the tax commissioner initiates a foreclosure action through the Court. The process generally involves two court hearings and extensive notification of interested parties. After the sale, only the current owner(s) of record has sixty (60) calendar days to redeem the property (pay off delinquent taxes plus any accrued interest, penalties and fees). If the current owner(s) of record fails to redeem in the property, the owner loses all rights to the property. Within thirty (30) days after the sixty (60) day redemption period, the bona fide purchaser at sale will be issued a Judicial In Rem Tax deed to the property, which effectively conveys title to the property free and clear from all liens, claims and encumbrances. The Judicial In Rem Tax Deed along with the Order or Report of the Judicial In Rem Sale is then filed with the Superior Court in the county where the property is located. At this time, Fulton County is currently using the in rem tax foreclosure process by ordinance in order to rehabilitate distressed neighborhoods in the Atlanta area.

What can be done to clear tax titles and make them insurable? The title examiner must determine whether the tax sale is either an in rem judicial tax foreclosure or a non-judicial tax foreclosure.

A. If the tax sale is an in rem judicial foreclosure, the title examiner must examine the tax foreclosure and obtain evidence of the following:

1. Determine that the Court Order of Judicial In Rem Sale is executed and in final form.
   
2. Determine that the all the holders of an interest in the property were named as defendants and received proper notice in the foreclosure action.
   
3. Determine that the former owner has surrendered possession of the property.
   
4. Determine that the right of redemption has not been exercised by the property owner within 60 days after the tax sale.
   
5. Determine whether prior liens, encumbrances, easements and restrictions have been extinguished.
   
6. Determine that both the Order and Judicial In Rem Tax Deed are properly executed and filed for record.

B. If the tax sale is a traditional non-judicial tax foreclosure, Issuing Agents must obtain satisfactory evidence of the following:

1. The property has been occupied by the owner for more than 20 years since the tax sale.
   
2. If there is less than 20 years since the tax sale, Issuing agents may only insure if the holder of the tax deed provides the Company with satisfactory evidence of either of the following:
   
   a. The holder of the tax deed or subsequent purchaser has foreclosed the right of redemption according to the statute and filed an action to Quiet Title in which all the holders of an interest in the property were named as defendants and received proper notice and a final executed Order quieting title to the property has been issued by the Court in this action; OR
   
   b. The holder of the tax deed or subsequent purchaser obtains and files for record a Quitclaim Deed from the record owner(s), who owned the property prior to the time of the tax sale (i.e. the defaulting taxpayer) .

COMPANY POLICY: Upon satisfactory evidence that the items set forth above are accomplished and in proper form, Issuing Agents may proceed to insure the property. Please call your local underwriter if these requirements cannot be satisfied.

BE SURE TO CONSULT YOUR LOCAL STEWART UNDERWRITER IF YOU HAVE ANY QUESTIONS. 

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