From Tues. May 26, 1992 Rep. Amer. by Paul Ruszczyk
"Your legal matters"
SYNOPSIS: Admission by attorney who questions the legality of property seizure for tax liability. Cautions public about possible consequences. Rare media exposure regarding the nature of due process and constitutional limitations.
Paul Ruszczyk welcomes letters from readers. Please write to him at the Business News desk, Waterbury Republican American, 389 Meadow St., Waterbury 06722.
Q: I have seen newspaper articles recently about tax sales that local towns have conducted. It appears that some real estate was sold at very good prices. How do these sales work and should I consider bidding?
A: Connecticut law gives towns the right to sell tax-delinquent property. The tax collector must post signs, advertise the sale and mail notices to the property owner and any bank holding a mortgage or any other person holding a lien.
After the auction, the tax collector executes a deed in the name of the successful bidder. That deed, however, remains unrecorded for one year. During that year, the property owner or any of the mortgage holders may redeem by reimbursing the successful bidder and paying 18% interest. In that case the unrecorded deed is delivered to the redeeming party.
In the event no one redeems within the year, the deed is recorded on the land records.
In general, it is inadvisable to bid at these sales, for the following reasons:
1) The statute is riddled with ambiguities and inconsistencies. For example, it is unclear who owns and has a right to occupy the property during the one-year redemption period, The successful bidder could argue that he or she has the right because the tax collector executed a deed. The owner could argue that he or she still has the right to occupy because the deed has not become final and the redemption right exists.
2) More important, the statute contains at least one provision that, in the opinion of many legal scholars, is unconstitutional. That provision allows the town to wipe out the owner's and mortgage holders' rights merely by mailing notice to them. In any ordinary foreclosure, all persons having an interest in the property receive notice from a sheriff and have an opportunity to present defenses and to share in the proceeds of the foreclosure sale, Section 12-157 wipes away all those protections.
You may ask, why should I, as a potential bidder, care about the rights of the owner and mortgage holders? You must be aware that the owner or mortgage a holder could wake up at some later date and constitutionally challenge your right to own the property. There is a good chance that you will lose and even if you don't you will become involved in a costly legal battle.
3) Because of the statute's constitutional shortcomings, several of Connecticut's title insurance companies refuse to insure title obtained through one of these tax sales. Their opinion is that such title is simply un-marketable. Without the ability to purchase title insurance you will never be able to finance the property through a bank. Nor will you ever be able to sell it or any part of it to a person who needs bank financing.
4) If the property is going to tax sale and a mortgage holder has not come forward to pay the taxes, there is probably a good reason why no one is willing to spend money to save the property. Often such property has environmental contamination or other problems that could result in liability.
Paul Ruszczyk is an attorney with a Cheshire law firm.
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