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Alabama changes law regarding tax redemptions

By Elizabeth Loefgren • Sunday, June 9, 2013

In its last session, the Alabama legislature passed HB47 into law, and effective August 1, 2013, it will modify Ala. Code § 40-10-28 regarding the disposition of excess funds which arise out of a tax sale. § 40-10-28 states that any excess arising from a tax sale will be paid to the owner.  The Alabama Court of Civil Appeals in First United Security Bank and Paty Holdings, LLC v. McCollum, 2012 WL 5974322 (First United) interpreted the term “owner” as the party who owned the property at the time of the tax sale. Accordingly, a lender that redeemed property after a tax sale would not be entitled to the surplus because the lender did not have title when the tax sale took place.

HB47 reverses the Court's decision in First United and clarifies that, after August 1st, the excess funds from a tax sale “shall be paid over to a person or entity who has redeemed the property.”  After August 1, 2013, when a lender redeems the property from a tax sale, it may recoup the overbid.  Sirote will provide a case by case analysis for any of its clients' files that may be affected by this new law.

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