Stephen Morel, CEO of JurisDeed, has been instrumental in effecting legislative changes governing tax sales in Louisiana for the past 10+ years. In his detailed white paper, Morel walks you through the past, present, and hopeful future for the tax sale process in Louisiana. Contrary to past beliefs about Louisiana tax sales, this is a lien state, and despite a few quirky characteristics, it actually has one of the fairest and most effective systems for tax sales in the country, but, is also still evaluating numerous additional improvements.
This summary will focus on the current state of the tax sale process in Louisiana; however, Stephen Morel’s white paper is a detailed accounting of where the state has come from and where it is going as well. Morel wrote this paper in 2020 and certainly some changes have been made which can be found in his follow up interview with Brian Seidensticker in 2021. We will also try to incorporate the changes that were made in the 2021 legislative session that are not captured in the white paper.
- In Louisiana there are tax lien auctions at the parish (county) and municipal level (excluding municipalities that are consolidated with their parish government), which may be online of live auctions in Louisiana. Many of the online parish (county) tax lien auctions are handled through CivicSource.
- The price to purchase the tax lien at the Louisiana tax lien auction is fixed, and includes the delinquent taxes, 5% penalty and 1% simply monthly interest. Uniquely, however, although what is being sold is a lien, not a deed, the biddable factor at the auction between competing bidders is the percentage of ownership (starting at 100% and biddable down to 1%) in the underlying parcel, which the bidder is willing to receive as collateral in the event the lien fails to timely redeem. The lowest bid placed at the time the auction for that property ends is accepted as the winning bid and that bidder must pay the fixed offering price and in exchange receives a ‘tax sale certificate’.
- Somewhat confusingly, Louisiana law also refers to what the investor has purchased as “tax sale title even though the ‘tax sale certificate’ conveys no rights of ownership – at least during the redemption period. The tax lien holder, also known as a “tax sale certificate holder”.
- The redemption period is three years from the date the tax sale certificate is recorded but can be potentially shortened if the tax lien holder can prove in court the property was blighted or abandoned at the time of the tax lien auction. During the redemption period, redemptions are exclusively handled by the taxing authority to which the delinquency is owed, but, afterwards, the governing authority is completely out of the picture.
- In the event of redemption, the taxing authority collects from the payer and in turn pays the tax lien holder a sum made up of 1) the tax sale price paid, 2) 5% penalty on the tax sale price (no interest accrues on this), and 3) a rate of 1% simple monthly interest on the tax sale price running from the month of the auction through the month of redemption.
- If redemption does not occur within the redemption period, the taxing authority is no longer involved and the tax debtor’s only recourses are to buy the tax lien holder’s interest/rights back (usually via quitclaim deed) at any negotiated price, or assert a judicial challenge to the legality or validity of the tax sale itself.
- According to statute, “Tax sale title” is fully transferable and heritable, but any successor of a tax sale title takes it subject to any existing right to redeem the property, or to assert a nullity, to the extent and for the period of time that the right would have existed in the absence of the transfer or succession. A person who acquires ownership of property through a tax sale title takes the ownership subject to any such interests not so terminated.”
- A redemption rights notice is required to be given (usually by certified mail) by the tax lien holder to all those having an interest in the underlying parcel, at least six months before the expiration of the redemption period.
- To convert the unredeemed, post-redemption period tax lien to actual ownership in the underlying parcel (to the % ownership purchased in the tax lien auction only), the lien holder has three options:1) file a quiet title civil suit, 2) file for a quasi-judicial ‘monitions’ proceeding, or 3) strictly follow a non-judicial, due diligence compliance process.
- Parcels not sold at a tax lien auction become “adjudicated properties” that the city or parish governing bodies can offer for sale (full ownership) at least three years, but usually five years after the unsuccessful tax lien auction if redemption has still not happened by that time.
To learn more about how to file for quiet title as well as other challenges to the tax sale system, be sure to read all of Stephen Morel’s extensive white paper. You can also watch a follow-up interview with Morel that covers the changes made in 2021. This interview also covers the additional statutory changes that Morel and colleagues are seeking for future legislative sessions.