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Law on Tax Sales of Real Estate


Law on Tax Sales of Real Estate

 
Judge Roger M. Young
Former Charleston County Master in Equity 

This outline was prepared for a CLE given on October 9, 1998

 
1.  Constitutional and Statutory Basis for Tax Sales.
   A. The General Assembly may provide for the ad valorem taxation by the State or any of its subdivisions of all real and personal property. South Carolina Constitution, Article X, §1.
  i. The General Assembly shall provide for the assessment of all property for taxation, whether for state, county, school, municipal or any other political subdivision. All taxes shall be levied on that assessment. Article X, §4.
  ii. The General Assembly may vest the power of assessing and collecting taxes in all of the political subdivisions of the State. Article X,§6.
   B. The sale of real property for the satisfaction of ad valorem taxes is governed by §§12-49-10 through 330 and §§12-51-40 through 170, Code of Laws of South Carolina,1976, as amended.
   C. Every person is liable to pay taxes and assessments on the real estate which he owns or may have the care of as guardian, executor, trustee, or committee. §12-37-610.
   D. All lands shall be listed and assessed as the property of the person having the legal title to, and the right of possession of, the land at the time of listing and assessment and, in case or persons having possession of lands for life, in the name of the life tenant. §12-37-740.
   E. Taxes, assessments and penalties legally assessed shall be considered and held as a debt to the State by the person against whom they be charged and shall be a first lien upon the property taxed.§12-49-10.
  i. Taxes cannot be held to constitute a lien on property without statutory authority. Dickson v. Burckmyer, 67 S.C. 526, 46 S.E. 343 (1903).
  ii. Actual delinquency is a condition precedent to the right to sell any realty under a tax assessment. Hiott v. Cochran, 213 S.C. 207, 48 S.E. 2d 803 (1948)
  iii. County tax lien has priority over federal tax lien even though federal tax lien was filed before county tax lien accrued. Taylor v. Mill, 310 S.C. 526, 426 S.E.2d 311 (1992).
    i. County tax lien has priority over federal tax lien even though federal tax lien was filed before county tax lien accrued. Taylor v. Mill, 310 S.C. 526, 426 S.E.2d 311 (1992).
   F. Lien attaches to all real and personal property on December 31 for taxes to be paid during the ensuing year. §12-49-20.
   G. All real property returned delinquent by the county treasurer upon which the taxes shall not be paid by distress or otherwise shall be seized and sold as provided in this Title.§12-49-40.
   H. The distress and sale of personal property shall not be a condition precedent to seizure and sale of any real property hereunder. §12-49-40.
  i. For many years it was considered the general rule that the personal property of the delinquent taxpayer should first be exhausted before recourse be had against the real property. The lien on the real property remained valid in case the personal property was insufficient to pay the amount of the delinquent taxes. Ebaugh v. Mullinax, 34 S.C. 364, 13 S.E. 613 (1891). However in 1902, section 2570 was passed by the General Assembly which is now §12-49-40.
   I. A county and municipality may contract for the collection of municipal taxes by the county.§12-51-170.
 
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2.  Law or Equity Case
   A. A suit to set aside a tax deed for alleged invalidity is essentially one where equitable matters and questions of law are involved and should be passed upon by the court. The usual and better procedure is to refer such cases. Union Central Life Ins. Co. v. Crouch, 189 S.C. 57, 200 S.E. 356 (1938).
 
3.  Strict Compliance with Statutory Requirements.
   A. The South Carolina Supreme Court has "consistently held the enforcing agencies of government to strict compliance with all the legal requirements surrounding tax sales. "Dibble v. Bryant, 274 S.C. 481, 483, 265 S.E.2d 673, 675 (1980).
   B. All requirements of the law leading up to tax sales which are intended for the protection of the taxpayer against surprise or the sacrifice of his property are to be regarded as mandatory, and are to be strictly enforced. Aldridge v. Rutledge, 269 S.C. 475, 478, 238 S.E. 2d 165, 166 (1980);Osborne et al v. Vallentine, 196 S.C. 90, 12 S.E. 2d 856 (1941).
   C. If the governmental agency charged with collecting delinquent ad valorem taxes fails to strictly comply with the statutory requirements of a tax sale, the sale is invalid. Manji v. Blackwell, 323 S.C. 91,473 S.E.2d 837 (Ct. App. 1996).
 
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4.  Presumptions and Burden of Proof.
   A. A tax deed, "whether executed to a private person, a corporation, or a forfeited land commission, must be held and taken as prima facie evidence of good title in the holder, that all proceedings have been regular and that all legal requirements have been complied with." §12-51-160;Leysath v. Leysath, 209 S.C. 342, 40 S.E.2d 233 (1946).
   B. But this presumption may be rebutted by proof of noncompliance with the necessary legal prerequisites of the sale. Glymph v. Smith, 180 S.C. 382, 185 S.E. 911 (1936).
   C. The purpose of the statute making the tax deed prima facie evidence of good title was to relieve the purchaser of the almost impossible task of affirmatively showing that all preliminary steps required by the law regulating tax sales had been complied with. The burden of proving that the title is defective is on the party attacking the deed. Leysath v. Leysath, supra.
   D. A party with a valid legal title is presumed to be in possession and this presumption must be met by party denying same. Lancaster v. Miller, 151 S.C. 233, 148 S.E. 371 (1929).
   E. "The purchaser has nothing to do but throw down this deed, and there to rest until the assailing party shall show by evidence that some material prerequisite - some necessary, preliminary step in the tax machinery - has not been complied with; and upon the failure to show this the deed must stand. Shell v. Duncan, 31 S.C. 547, 10 S.E. 330 (1889).
   F. The burden is upon the party attacking the deed to show a jurisdictional defect. Walker v. Williams, 212 S.C. 32, 46 S.E. 2d 249 (1948).
   G. In the absence of any proof to the contrary, there is a presumption that public officers have properly discharged the duties of their office. Fischer v. Bennett, 202.S.C. 534, 25 S.E.2d 746 (1943).
   H. Under the statutes of this state a tax title is presumed to be good and the burden is upon the defendant to show the defect. Gadsden v. West Shore Inv. Co., 99 S.C. 172, 82 S.E. 1052 (1914).
 
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5.  Statutes of Limitation.
   A. A tax may not be collected by levy, warrant for distraint, or proceedings in court unless the levy, warrant for distraint or court proceedings were begun within ten years after the assessment of the tax. §12-54-85(E).
   B. An action for recovery of land sold under these provisions must be brought within two (2) years from the date of sale. §12-51-160.
   C. Short statutes of limitation barring actions to recover land sold for taxes are not construed with the same liberality exhibited toward general statutes of limitation. Scott v. Boyle, 271 S.C. 252, 246 S.E.2d 887 (1978).
   D. All defects, irregularities, informalities, errors and omissions in assessments, taxation and sale, which are not jurisdictional are cured and foreclosed when the statute has run the prescribed length of time. Leysath v. Leysath, supra. The court then declined to lay down a general rule defining those defects which should be construed as mere irregularities and those which should be deemed jurisdictional.
  i. Notice of right to redeem is jurisdictional. Good v. Kennedy, 291 S.C. 204, 352 S.E. 2d 708 (Ct.App.1987).
  ii. Notice of levy is probably jurisdictional since it’s requirement cannot be waived by debtor and failure to give renders sale void. Tax sale under an execution issued against one who is not the owner of the land is void. Donohue v. Ward, 298 S.C. 75, 378 S.E. 2d 261 (Ct.App.1989).
  iii. Failure to give notice right to redeem to mortgagee may have the effect of being deemed jurisdictional under the result of Durhamcase discussed below if mortgagee’s right to notice of sale survives two year limitation.
  iv. Where amount of aggregate tax is correct, mere omission of filling in certain blanks showing the amount of tax going to each specific fund is not material for the information or protection of the taxpayer (mere irregularity). Interstate Building & Loan Association v. Waters,50 S.C. 459, 27 S.E. 948 (1897)
   E. In Dibble v. Bryant, supra, Supreme Court held this statute was intended to bar a defaulting and ousted taxpayer from maintaining an action to defeat the title of the tax sale purchaser and recover the land if brought more than two years from the date the tax sale purchaser came into possession. The Court held the defaulting taxpayer could not bring his action to recover possession until there was a person on the land withholding possession from him.
  i. "The statute did not intend to bar the taxpayer’s right until he had two years within which he could bring his action. He could not bring his action until there was a person on the land withholding possession from him. Dibble, at 487, quoting Gardner v. Reedy, 62 S.C. 503, 40 S.E. 947 (1902).
  ii. Caution - this case was decided under an old code section which was repealed and replaced by §12-51-160. However the wording from the old statute is almost identical to the new statute with regard to this item.
   F. In Donohue v. Ward, supra, the Court of Appeals held that under the Soldiers and Sailors Civil Relief Act of 1940, 50 U.S.C.S. § 525, the period of military service shall not be included in determining whether or not a statute of limitation has run against a serviceman even though he may be a "career serviceman".
   G. See also § 12-51-130 (delivery of tax deed to register of deeds puts purchaser in possession).
   H. See also Durham v. United Companies Financial Corp., Op. No. 24813 filed 7/13/98, where Supreme Court held there is no requirement that notice of redemption to mortgagee requirement be given within the 1 year period of redemption requirement of §12-51-90. Only requirement is that the notice be given 30 days before tax deed is delivered to purchaser. That can be before or after the 1 year redemption period. If it is never given, when is it too late to attack the sale?
   I. Attorney who represents client at closing for purchase or refinance has no duty to discover whether tax deed clouds client’s chain of title where more than two years has passed from time vendor acquired property through tax sale. Wilson v. Mosely, 327 S.C. 144, 488 S.E.2d 862 (1997).
   J. Two year statute of limitation does not operate in favor of a purchaser at tax sale where there was no administration of estate and the property was assessed in the name of "the estate of" the decedent. Sale is void. Dunham v. Davis, 229 S.C. 29,91 S.E. 2d 716 (1956).
  i. When is void not void? In Hemingway v. Mention, 228 S.C. 211, 89 S.E.2d 369 (1955), a property which was part of an estate which was not administered was assessed against the estate of the deceased instead of against his heirs. However, the heirs’ claim was barred by laches because they waited twenty years to bring a quiet title action.
   K. §15-3-370. Persons under disability.
  i. If a person entitled to commence any action for the recovery of real property, or make an entry or defense founded on the title to real property or to rents or services out of the same is, at the time the title shall first descend or accrue, either (1) within the age of eighteen years; or (2) insane; the time during which the disability shall continue shall not be considered any portion of the time in this article limited for the commencement of the action or the making of the entry or defense, but the action may be commenced or entry or defense made after the period of ten years and within ten years after the disability shall cease or after the death of the person entitled who shall die under the disability. But the action shall not be commenced or entry or defense made after that period.
 
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6.  Tax Execution.
   A. Under §12-51-40et seq, these are the procedures the government must follow to issue a tax execution:
  i. If taxes not paid by the 16th of January of year immediately succeeding the year for which the taxes are due, the county shall add 3% penalty.§12-45-180(a).
  ii. If taxes not paid by second day of the next February an additional 7% penalty must be added. Id.
  iii. If taxes not paid by March 17th an additional penalty of 5% added.
  iv. The county treasurer must then issue a tax execution directed to the person authorized to collect delinquent taxes. Id.
 
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7.  First Notice Requirement-Notice of Delinquent Tax.
   A. Due process of law requires some sort of notice to a landowner before he is deprived of his property. Osborne v. Vallentine, supra.
   B. Once the delinquent tax collector has been issued an execution notice by the treasurer against the property, he must do the following:
  i. On April first or as soon thereafter as practicable, mail a notice of delinquent property taxes, penalties, assessments, and costs to the owner of record at the best address available which is either:
    i. the address shown on the deed conveying the property to him,
    ii. the property address, or
    iii. such other corrected or forwarding address that the owner of record has filed with the appropriate tax authority, and
    iv. to a known grantee of the delinquent taxpayer of the property on which the delinquency exists.
    v. The notice must specify that if the taxes, penalties, assessments, and costs are not paid, the property must be advertised and sold to satisfy the delinquency. §12-51-40(a).
      (a) The notice must specify that if the taxes, penalties, assessments, and costs are not paid, the property must be advertised and sold to satisfy the delinquency. §12-51-40(a).
   C. The giving of a mandatory notice to a tax debtor is not waived by the informal notice on his part that taxes have not been paid, and the sale is void even if the debtor has actual knowledge of it and attempts to waive a failure to give notice. Donohue v. Ward, supra, quoting 85 C.J.S. Taxation §790.
   D. Failure to send the notice of delinquent taxes to the "more correct address known" constituted a material violation of §12-51-40(a). Snelgrove v. Lanham, 298 S.C. 302, 379 S.E.2d 904 (1989). Apparently no one raised the issue in the case that §12-51-40(a) did not take effect until 1-1-86 yet the tax sale in question took place in either 1983 or 1984.
 
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8.  Second Notice Requirement - Levy on Execution
   A. If the taxes remain unpaid after thirty days from the date of mailing of the delinquent notice, or as soon thereafter as practicable, take exclusive possession of so much of the defaulting taxpayer's property as is necessary to satisfy the payment of the taxes, assessments, penalties, and costs may be taken. §12-51-40(b)
  i. In the case of real property, exclusive possession is taken by mailing a notice of delinquent property taxes, assessments, penalties, and costs to the defaulting taxpayer at the address shown on the tax receipt or to a more correct address known to the officer, by "certified mail, return receipt requested-deliver to addressee only". §12-51-40(b).
    (a) "Levy" as used here is for the purpose of conferring all the powers incident to the creation and collection of a tax. It is only intended to confer administrative powers in the collection of the tax. Dickson v. Burckmyer, supra.
    (b) Pre-1985 amendments the sheriff had to "seize and take exclusive possession" §12-49-460 (repealed). Levy can now be done by mail.
    (c) Be careful using older cases to interpret levy notice requirements. Law was changed in 1985 and took effect 1-1-86. There were different requirements under older law which makes the reasoning behind some of the older cases non-applicable to the new law. For instance, levying on the execution or taking "exclusive possession" can now be done by mail under §12-51-40(b) whereas under the old statute the sheriff had to enter the property armed with the tax execution and exhibit it to the owner or post it on the property.
  ii. All delinquent notices shall specify that if the taxes, assessments, penalties, and costs are not paid on or before a subsequent sales date, the property must be duly advertised and sold for delinquent property taxes, assessments, penalties, and costs. The return receipt of the "certified mail" notice is equivalent to "levying by distress". §12-51-40(b).
  iii. Note: There is no form published by the United State Postal Service which says "certified mail, return receipt requested -deliver to addressee only". See discussion below.
   B. Tax execution is not issued against the property, it is issued against the defaulting taxpayer. Statute is explicit that land shall be listed and assessed and levied on and sold in the name of the true owner. Alridge v. Rutledge, supra (Sale set aside where notice of levy and sale was in parent’s name who was living on property instead of son who owned property even though he had actual notice by mail).
   C. Notice sent to father as agent for children who held title to property not allowed. Rives v. Bulsa, 325 S.C.287, 478 S.E.2d 878 (Ct. App. 1996).
   D. Assessment, levy and execution and sale must be made in name of true owner. Where owner of property dies after January 1, it is proper that assessment was issued in name of decedent since lien attached at the beginning of the fiscal year. However, the levy, advertisement and sale should be made in the name of the devisees because they were the owners at the time thereof. Osborne, supra.
   E. Where there is no administration of the estate of a person dying intestate, it is sufficient to assess land as belonging to the "heirs" of such decedent, but not "the estate of" decedent. Carter v. Wroten, 187 S.C.432, 198 S.E. 13 (1938).Walker v. Williams, supra.
  i. It would be unreasonable to require tax officers to unravel complicated inheritances and state on the tax list the Christian and family names of all the heirs of persons deceased. Koth v. Pallachucola Club, 79 S.C. 517, 61 S.E.2d 78 (1908).
   F. In the case of estates administered, the property shall be listed and assessed as the property of "the estate of" the decedent, at least during the time the estate is being administered. §12-37-740. Carter v. Wroten, supra.
   G. A sale of land under a tax execution issued on an assessment against one not the owner is void. Donohue v. Ward, supra.
   H. The statutes provide that property in the possession of a life tenant shall be listed for taxation against him. They do not contemplate that the taxes should be assessed against the property of the remainder men. Taylor v. Strauss, 95 S.C. 295, 78 S.E. 883 (1913).
   I. Levy on property "as may be sufficient" to satisfy the taxes, assessments, penalties and costs requirement.
  i. The sheriff cannot be expected to know in advance exactly how much land will be necessary to sell to collect the amount due. Dickson v. Burckmyer, supra.
  ii. See Godfrey v. Webb, 277 S.C. 246, 285 S.E.2d 2d 883 (1982), where the Supreme Court held that under the previous code section which said the sheriff was to levy against "so much of the defaulting taxpayer’s estate . . . as may be necessary to raise the sums of money . . .", the levy was excessive where the sheriff levied against an entire 61 acre tract to satisfy a tax lien of $29.14. The value of the entire tract of land was at least 1000 times the amount of the delinquent taxes (somewhere between $35,000 and $71,500). The county treasurer admitted he could have divided the land so as to levy upon a smaller portion; however, he chose to levy upon the entire tract. The levy was excessive and the tax sale was declared null and void.
  iii. Query: Suppose a defaulting taxpayer had two parcels of property which were being sold on the same day to satisfy two separate tax liens. Could the taxpayer have the sale of one property set aside if the sale of the one piece of property was sufficient to pay the tax liens of both pieces of property? It appears the answer to that may be yes.
    i. In case the defaulting taxpayer has more than one item advertised to be sold, as soon as sufficient funds have been accrued to cover all of the defaulting taxpayer's delinquent taxes, assessments, penalties, and costs, no further items may be sold. §12-51-50 which became effective 1-1-86.
    ii. In Southern Region Industrial Realty v. Timmerman, 285 S.C. 142, 328 S.E.2d 128 (Ct. App. 1985), the court upheld a lower court’s finding of excessive levy where a smaller tract was worth several times the amount of tax due and that it, combined with a larger tract owned by taxpayer actually sold for approximately four times the amount of taxes due.
  iv. Question of excessiveness is one of fact. The question presented in each case is whether the selling officer exercised reasonable discretion in selling as much of the property as he did. Southern Region Industrial Realty v. Timmerman, supra.
  v. There are no fixed guidelines as to what constitutes excessive levy. Alridge v. Rutledge, supra. (levy not excessive where sale of one lot "nearly" brought enough to raise the delinquent amount of two lots).
  vi. Tax sale does not necessarily exact an excessive levy because it brings considerably more than the tax debt. Dickson v. Burckmyer, supra (sale where land sells for 10 times tax debt held not excessive).
  vii. Inadequate price alone not sufficient reason to set aside sale. Court of equity will only set aside sale if price is grossly inadequate and the sale is accompanied by either fraud, mistake, misapprehension, surprise or other circumstances which might authorize a finding that such circumstances contributed to bringing about the inadequacy of the price. Patterson v. Goldsmith, 292 S.C. 619, 358 S.E.2d 163 (1987) (court refused to set aside sale where $50,000 property sold for $600 to satisfy delinquent taxes of $270.67)
  viii. Tax authority should be guided not by what the land is really worth but what it should bring. Wilson v. Cantrell, 40 S.C. 114, 18 S.E. 517 (1893).
  ix. The fact that an entire tract was sold without any effort to divide it provides no basis for the invalidation of the tax sale in the absence of fraud or collusion. Id.
  x. The title of a purchaser who has bought in good faith at a tax sale should not be disturbed because the sheriff levied on more property than was necessary, unless the levy was so excessive as to indicate oppression, arising from design or inexcusable ignorance. Dickson v. Burckmyer, supra.
  xi. Condominium is real property for tax sale purposes. Dibble v. Schade, 308 S.C. 88, 417 S.E.2d 104 (Ct.App. 1992).
 
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9.  Third Notice Requirement - Levy by Posting Notice at Property.
   A. In the event the "certified mail" notice has been returned, take exclusive physical possession of the property against which the taxes, assessments, penalties, and costs were assessed by posting a notice at one or more conspicuous places on the premises, in the case of real estate, reading: "Seized by person officially charged with the collection of delinquent taxes of (name of political subdivision) to be sold for delinquent taxes", the posting of the notice is equivalent to levying by distress, seizing, and taking exclusive possession thereof, or by taking exclusive possession of personally. §12-51-40(c).
  i. This is an alternative method of levying on the execution in the event the certified mail notice has been returned.
   B. Sole act of tacking a notice of sale in the name of the prior owner to the front of an abandoned building on property subject to an outstanding mortgage lien fails to give reasonable notice to the parties in interest as required by due process and statute. Dibble v. Bryant, supra.
 
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10.  Fourth Notice Requirement - Advertisement of Sale
   A. The property must be advertised for sale at public auction. The advertisement must be in a newspaper of general circulation within the county or municipality, if applicable, and must be entitled "Delinquent Tax Sale". It shall include:
  i. the delinquent taxpayer's name,
  ii. the description of the property, and
  iii. a reference to the county auditor's map-block-parcel number being sufficient for a description of realty. §12-51-40(d).
    (a) Tax sale set aside where advertisement contained incorrect tax map number. Rose v. Bradwell, 295 S.C. 147, 367 S.E.2d 443 (Ct.App.1988).
   B. The advertising must be published once a week prior to the legal sales date for three consecutive weeks for the sale of the real property. All expense of the levy, seizure, and sale must be added and collected as additional costs, and shall include, but not be limited to, the expense of taking possession of real or personal property, advertising, storage, identifying the boundaries of the property, and mailing certified notices. When the real property is divisible, the tax assessor, county treasurer, and county auditor shall ascertain that portion of the property that is sufficient to realize a sum upon sale sufficient to satisfy the payment of the taxes, assessments, penalties, and costs. In such cases, the officer shall partition the property and furnish a legal description of it. §12-51-40(d).
  i. See earlier discussion on divisibility of property for levying on execution in paragraph 5.
 
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11.  Sales Procedures.
   A. The property duly advertised must be sold by the person officially charged with the collection of delinquent taxes at public auction at the courthouse or other convenient place if designated and advertised on a legal sales date during regular hours for legal tender payable in full on the date of the sale. §12-51-50.
  i. Statutory provisions which are intended merely for the convenience of taxing officers in the conduct of sales need not be strictly complied with. Walker v. Harris, 170 S.C. 242, 170 S.E. 270 (1933).
  ii. "Or other convenient place if designated and advertised" added in 1997. Charleston County has a circuit court order in place authorizing their tax sales to take place at the King Street Palace since temporary courthouse is too small to accommodate sale.
  iii. In case the defaulting taxpayer has more than one item advertised to be sold, as soon as sufficient funds have been accrued to cover all of the defaulting taxpayer's delinquent taxes, assessments, penalties, and costs, no further items may be sold. §12-51-50.
   B. The delinquent tax collector must submit a bid equal to the amount of the unpaid taxes, penalties and costs on behalf of the Forfeited Land Commission (FLC). §12-51-55.
   C. Unless someone else submits a higher bid, the FLC is deemed the successful bidder.
  i. Note: Once period of redemption expires FLC gets deed to property. If property is later purchased from FLC, the amount of consideration paid to FLC is not applied to delinquent taxes. In other words, the purchaser may still owe original back taxes after receiving deed from FLC.
   D. The successful bidder at the delinquent tax sale must pay the full amount of his bid on the day of the sale. The Treasurer is to provide the purchaser with a receipt and mark the public tax records "Paid by tax sale held on (insert date)." §12-51-60.
  i. Note: This code section was amended to add a requirement that the defaulting taxpayer must be notified in writing by the delinquent tax collector of any excess due the taxpayer once the tax deed has been issued. This effects delinquent tax sales occurring on or after May 20, 1996
   E. Successful bidder does not receive a tax deed or any right to possession at this time. The successful bidder’s interest in the property does not vest until after the redemption period in §12-51-90 and the expiration of the notice period required by §12-49-300.
 
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12.  Rights of Owner During Redemption Period.
   A. The property duly advertised must be sold by the person officially charged with the collection of delinquent taxes at public auction at the courthouse or other convenient place if designated and advertised on a legal sales date during regular hours for legal tender payable in full on the date of the sale. §12-51-50.
   B. The Recording Act (§30-7-10) does not protect a bona fide purchaser against liens or others interests arising out of instruments not entitled to be recorded. The tax lien is a creature of statute rather than of conveyance evidenced by a written instrument and is not embraced by the Recording Act. Von Elbrecht v. Jacobs, supra.
  i. Priority of federal tax lien deed not determined by Recording Act since county tax liens are first liens even after property is conveyed. Taylor v. Mill, supra.
   C. A deed by the taxpayer after the tax sale merely transfers the right to redeem. Grantee loses any claim to property if redemption not made within period allowed by law. Von Elbrecht v. Jacobs, supra.
 
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13.  Fifth Notice Requirement - Notice of Approaching End of Redemption Period.
   A. Prior to the end of the twelve-month redemption period, the delinquent tax collector must give the owner of record notice "at the best address available", via "certified mail, return receipt requested-deliver to addressee only," that the redemption period is about to expire. §12-51-120.
   B. The notice must be sent no more than forty-five days nor less than twenty days prior to the end of the redemption period, and must alert the owner that the property described therein has been sold for taxes and if not redeemed in the manner specified therein by the date specified therein (twelve months from the date of the sale) a tax deed will be delivered to the successful bidder. Id.
   C. Because this right to notice is jurisdictional, an owner's right to redeem cannot be terminated unless the notice is given; and failure to give such notice in the manner proscribed prevents the title to the property from being transferred to the successful bidder. Good v. Kennedy, supra.
  i. Where a statute permits the giving of notice by mail, the person authorized to send the notice must exercise diligence to ascertain the correct address of the property owner. In Good v. Kennedy, supra, The Court of Appeals held the Tax Collector had notice that address in Tax Assessor's files was not the best available address when the notice was returned undelivered marked "moved left no address." The taxpayer should not be penalized if an incorrect address was placed on the Assessor's records unbeknownst to him. The Court felt due diligence by the Tax Collector would have uncovered the taxpayer's address. Interestingly, the notice was sent to the street address of the property. However, the taxpayer did not reside at the property and had another mailing address.
  ii. See also Benton v. Logan, 323 S.C. 338, 474 S.E.2d 446 (Ct.App.1996), where the Court of Appeals held the treasurer did not exercise due diligence when he had received back the envelope containing the notice of redemption marked "Forwarding Order Expired".
    i. But see §12-51-120 which states "under this chapter, the return of the certified mail "undelivered" is not grounds for a tax title to be withheld or be found defective and ordered set aside or canceled of record." This language was quoted in Bentonbut was not discussed. The Court of Appeals said Good v. Kennedy controlled the result.
  iii. Failure to give the required notice is a fundamental defect in the tax proceedings which renders the proceedings absolutely void. The requirement of that the levy, advertisement and sale must be made in the name of the true owner even if the true owner had actual notice of the sale and attempts to waive a failure to give notice. Without strict compliance with the statutory requirements, a tax sale may not be upheld. Donahue v. Ward, supra. Aldridge v. Rutledge, supra.
  iv. In Manji v. Blackwell, supra, the Court of Appeals voided a tax sale where the redemption notice was sent to the defaulting taxpayer and received by wife. The redemption notice was sent certified mail only, not "delivery to addressee only."
    i. Note: the Court did not address the fact that form does not technically exist as noted below.
  v. S.C. Code §§12-51-40(b), 12-51-60 and 12-51-120 require various notices to be sent to the defaulting taxpayer by "certified mail, return receipt requested-deliver to addressee only". There is no form put out by the United States Postal Service which has this language on it. To correct this problem (and avoid having a court rule every tax sale done in this state in the past several years invalid) the General Assembly attempted to correct this during the 1996 session. Act 332 added sections raising the interest rate in §12-51-90 and added a requirement in §12-51-60 that the tax collector notify the defaulting taxpayer of an excess sales proceeds. However, in an apparent typographical error, §12-51-120 was simply repeated in its current form verbatim in the Act. It did not change anything.
  vi. However, Act 4834, which was ratified by the Governor after Act 332, did correct the language in §12-51-120 to require the notice of redemption to be sent by "certified mail, return receipt requested-restricted delivery". This conforms to the form printed by the United States Postal Service. §§12-51-40(b) and 12-51-60 retain the old language.
  vii. But see also S.C. Fed v. Atlantic Land Title Co., 314 S.C. 292, 442 S.E.2d 630 (Ct. App.1994) before getting too excited which holds where notice of a tax sale exceeds the statutory requirements, the tax sale may not be set aside on the basis of insufficient notice (notice was sent by certified mail when statute at the time required it be sent by registered mail).
 
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14.  Sixth Notice Requirement - Notice of Sale to Mortgagee
   A. Notice of the sale must also be given to a mortgagee or assignee of a mortgage appearing of record within twenty (20) years of the seizure who has an interest in the real estate at least thirty (30) days prior to sheriff delivering the tax deed to the purchaser at the tax sale in order that the mortgagee or assignee may have the opportunity to redeem the property. §12-49-300.
  i. "If the statute says written notice shall be given, that is what it means, and any other sort of notice will not avail." Bailey v. Medlock, 185 S.C. 115, 193 S.E. 926 (1937) (where evidence was that mortgagee had received verbal notice after the sale several times in an informal manner).
   B. It was error to hold a mortgagee lacked standing to challenge a tax sale. Mid-State Trust, II v. Wright, 323 S.C. 303, 474 S.E.2d 421 (1996).
   C. Notice must be served either on the mortgagee or assignee in person or forwarded to his last known post office address by certified mail, return receipt requested-deliver to addressee only. §12-49-300.
  i. Durham v. United Companies Financial Corp., Op. No. 24813 filed 7/13/98. S.Ct. held there is no requirement that this notice requirement be given within the 1 year period of redemption requirement of §12-51-90. Only requirement is that the notice be given 30 days before tax deed is delivered to purchaser. That can be before or after the 1 year redemption period.
    i. The S.Ct. apparently ignored the case of Bailey v. Medlock, supra, which held that delivery of the tax deed without the 30 days’ notice in writing renders the sale and delivery of the deed null and void.
  ii. Query: Suppose the notice is never given to mortgagee and deed is delivered to purchaser. More than 2 years have passed. Does statute of limitations apply?
  iii. Note: There is no requirement that judgment creditors or any other lien holder be given any notice of the sale or redemption. Judgment creditor may redeem if they find out about it. §12-51-90.
  iv. Prior to Durham the Court of Appeals had found no error in a master’s holding that a tax sale purchaser would take the property subject to a mortgage lien of a mortgagee who did not receive notice of right to redeem. Rives v. Bulsa, supra.
 
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15.  Exercise of Right of Redemption.
   A. If the defaulting taxpayer redeems the property during the twelve-month period, the tax sale is canceled and the successful bidder's money is refunded together with interest. §§12-51-90 and 100.
  i. For delinquent tax sale sales taking place prior to May 20, 1996, the defaulting taxpayer must pay the assessments, penalties and costs along with eight (8%) percent interest on the whole amount of the tax sale bid (not just the amount of the delinquent tax). §12-51-90.
  ii. For sales after May 20, 1996, the interest rate rises to twelve (12%) percent for the last six months of the redemption period for non owner-occupied residential property.§12-51-90.
 
16.  Official May Void Tax Sale
   A. In the case that the official in charge of the tax sale discovers before a tax title has passed, the failure of any action required to be properly performed, the official may void the tax sale and refund the amount paid to the successful bidder. If the full amount of the taxes, assessments, penalties, and costs have not been paid, the property must be brought to tax sale as soon as practicable. §12-51-150
 
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17.  Failure to Redeem - Delivery of Tax Title to Bidder.
   A. If the defaulting taxpayer fails to redeem the property during the twelve-month period, his title is defeated and title to the property is transferred to the successful bidder. Von Elbrecht v. Jacobs, supra; §12-51-130.
   B. Delivery of the tax sale deed to clerk of court or register of deeds is considered "putting the purchaser in possession."§12-51-130.
   C. If there is a surplus of funds above the amount of delinquent taxes and penalties the overage belongs to the defaulting taxpayer. If unclaimed for 5 years it escheats to the general fund of the governing body. §12-51-130.
   D. Bidder entitled to writ of mandamus ordering sheriff to issue a deed once bid is complied with in all respects. State v. Lancaster, 46 S.C. 282, 24 S.E. 198 (1896).
 
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18.  Miscellaneous Matters Involving Tax Sales
   A. Cotenancy is dissolved upon delivery of the tax deed to the purchaser. Hamilton v. Shaw, 286 S.C. 374,334 S.E.2d 139 (Ct.App.1985)
  i. Once the cotenancy ceases to exist a cotenant may acquire the outstanding interest free of any equitable claims of his fellow cotenants in the absence of fraud. Id.
   B. A mortgagor cannot, by his negligence or fraud, allow the mortgaged lands to be sold for taxes and then acquire title at a tax sale which defeats the mortgagee's lien on said property. Interstate Building & Loan Association v. Waters, supra.
   C. Fraud in the procurement of a tax deed is ground for its cancellation in equity, whether the fraud be actual of constructive. Matthews v. Montgomery,193 S.C. 188,7 S.E.2d 841 (1940).
   D. One cannot list property for assessment and taxation in which he has no interest, make default on payment of taxes so assessed, have the sheriff advertise and sell the property, bid off the property at such sale, have the sheriff execute him a deed therefore, and then interpose this title as his protection when the rightful owner sues him in the courts. Pope v. Wilder, 41 S.C. 540, 19 S.E. 996 (1894).
   E. One who by virtue of an existing legal or contractual relation with another is under an obligation to such person to pay the taxes on lands, but who omits to pay such taxes, cannot be allowed to strengthen his title to such land by buying in the tax title when the property is sold as a consequence of his omission to pay the taxes on it; his purchase at the sale will merely operate as a payment of the taxes, and the title will be the same as it was before the sale, except that the lien for taxes is discharged. Morris v. Lambert, 218 S.C. 384,62 S.E.2d 841 (1950).
   F. Purchaser may be liable for wrongfully collected rents if tax sale is overturned. Smith v. Cox, 83 S.C. 1,65 S.E. 222 (1909).
   G. Purchaser may be liable for rents and profits he actually received, not for rental value. Garlington v. Copeland, 32 S.C. 57, 10 S.E. 616 (1890).
 
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19.  Practice Tips
   A. Don't make the county a party unless you have to.
   B. Don't rely too much on the defaulting taxpayer having burden of proof that deed is presumed valid if you have a contested case. If they say they did not get a notice, you then probably have to prove they did get sent the proper notice.
   C. Check very carefully to see if every single notice was given to every single person to whom notice was supposed to be sent.
   D. Check very carefully to see if every single notice was given in the manner it was supposed to be given.
   E. Check very carefully to see if every single notice was given at the time it was supposed to be given.
   F. Despite Wilson v. Moseley holding that you have no duty to discover whether tax deed on property cloud's clients title if more than two years have passed since deed, you should still check with your title insurance company to see if they will insure a closing with a tax deed in the chain of title.
 
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