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Alabama Law for You

  • Writer's pictureGregory Stanley

Tyler v. Hennepin v. AL Tax Laws

Updated: Apr 21

Typically, Supreme Court of the United States cases are not of great interest to investors in Alabama, and a few years ago, TYLER v. HENNEPIN COUNTY, would have fallen into the “doesn’t really affect me” category.  However, the new Tax Lien Certificate bid-down law may have opened up Alabama tax lien certificate investors to new jeopardy.  (Don’t worry if you only invest in tax deeds from the old system.) 


Government Takings

     

If a state or the Federal government retains the excess after a forced sale of property, it is a violation of the takings clause of the 5th amendment, and probably also violates the excess fines clause of the 8th Amendment.  It doesn’t matter that the government immediately passed the spoils to an individual citizen.  This withholding the excess value after a forced sale is the “government taking.”  The TYLER v. HENNEPIN COUNTY case upheld the centuries-old standard that the government may not force a sale unless they return the excess value to the former owner.  

 

The new tax lien certificate bid down property tax auction is a charade

     

The new Tax lien certificate system seems to run afoul of these basic principles of US and Alabama law. The new system in AL Code § 40-10-182 (2022) et seq. gives notice to the property owner of the auction, and the auction is held publicly, but that seems to be where the compliance ends.  First, the actual tax sale auction is not an auction, it is a charade.  Tax lien certificate auctions are not auctions in the sense that investors bid up the price like in every auction you have ever seen.  They call it an auction, but in fact, it is a lottery with no option of paying the actual value of the property.  People and companies offer to pay the taxes owed for the property for zero interest and their names go into a digital hat. A winner is chosen from that hat lottery style.  Almost all properties are sold by lottery because almost all investors offer to pay the taxes and accept zero percent interest.  So the initial sale is a lottery, not an auction. But the foreclosure auction isn’t an auction either.

 

The new tax lien certificate “judicial foreclosure” is also a charade

     

The new tax lien system has a “judicial foreclosure” requirement, but that too is either a charade, or just tragically mis-named.  The code actually requires a concurrent quiet title action, which would be redundant if the foreclosure were bona fide.  Under all other foreclosures in Alabama the plaintiff seeks an order from the judge to hold a proper auction. The auction is advertised and held publicly where the price is bid up.  Any money bid over the debt is paid to the debtor.  However, the new “tax lien judicial foreclosure” has no auction on the courthouse steps.  There is no foreclosure auction and there is no opportunity to bid the price above what is owed for taxes.  There is no option for the aggrieved property owner to recover any of the equity they had in the property.  Its a quiet title action.


Quiet title in a charade as a foreclosure

     

Every step of the new foreclosure case mirrors a quiet title action and does not require the same steps as a judicial foreclosure in Alabama.  The process has a new name so it might appear to be fair to the tax delinquent property owner.  This new tax lien certificate system is not fair, and it ensures the owner who could not make their tax payment gets nothing for the equity in their property.

     

To summarize, TYLER v. HENNEPIN COUNTY has just given more support to the claim that these tax lien certificate sales are un-Constitutional and the subsequent taking via “judicial foreclosure” violates Alabama principles of law and fairness.  Without a foreclosure sale, it isn’t a “foreclosure” it’s a quiet title.


Always use a reputable Alabama Lawyer when you are dealing with real property, whether you trust the other party or not.


 (205) 451-4196

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