Sale of Tax Deeded Property Within Three Years of a Collector's Deed
We have received numerous legal inquiries seeking details about the procedures that must be followed if a municipality wishes to sell property received by a Collector’s Deed within three years of the recording of that deed.
Q. Why would a municipality desire to sell property received by a Collector’s Deed within three years of receiving that deed, after all, isn’t it a good thing for the municipality to own more property?
A. There are times when land taken by Collector’s Deed for the non-payment of property tax can have a public use. It may be adjacent to a public facility, or to land restricted for conservation purposes, or may be a place where a future facility might be located. However, more often, such parcels will not have a contemplated future public use, and upon receipt of the Collector’s Deed simply become non-taxable. This reduces the overall tax base, and increases the amount of tax all other properties must pay. Thus, governing bodies will usually wish to dispose of the properties in a way that makes them productive again. Further, municipal officials often lack property management experience, and do not wish to take upon the legal responsibilities of serving as the landlord for occupied residential real estate.
Q. Can the governing body decide on its own which of the parcels should be sold, and how do they decide the method to use to offer the property to a potential buyer?
A. The governing body only has authority to sell if the legislative body (usually the town meeting) has given them this authority by passing a warrant article in accordance with RSA 80:42 or RSA 80:80. This is not the same as authority to sell real estate that may be given to a governing body under RSA 41:14-a. The authority in RSA 80 only applies to the sale of property that has been taken for the non-payment of taxes. The authority in RSA 41 applies to property acquired by other means, and also has been used to authorize sales of partial interests in real estate, such as easements over public property. The warrant article passed under RSA 80 may either specify the methods the governing body must use to offer the property for sale, or it may allow the selectmen to develop their own method of sale, “as justice may require”. Thus, each governing body must do the research to see what the legislative body has authorized them to do on this issue.
Q. Assuming the governing body has been given the authority to offer a property for sale, and they know the method they are required to use, are there other steps they must take?
A. Yes. Pursuant to RSA 80:89, the governing body must notify the previous owner that the land will be offered for sale, and of his or her right to redeem the land by paying taxes, interest, the statutory penalties and associated costs. The notice must go out 90 days prior to the same, and after the notice of offering, the former owner has 30 days to notify the governing body of an intent to repurchase, and 15 more days to actually tender all of the necessary funds to complete a repurchase. If that occurs, the town must reconvey the property to the former owner. The governing body must honor the rights of the former owner to exercise their rights of redemption if there is to be a sale, but the former owner can’t force the selectmen to offer the property for sale.
Q. If the former owner does not exercise the right of redemption and the property is sold, does the town get to keep all of the money?
A. Not if the sale occurs within the three year period following the recording of the collector’s deed. The town may only collect the taxes owed, interest, legal costs and the penalty defined in 80:90 as “An additional penalty equal in amount to 15 percent of the assessed value of the property as of the date of the tax deed, adjusted by the equalization ratio for the year of the assessment.” The remainder of the money goes to the former owner in accordance with RSA 80:88.
Q. What if the governing body can’t find the former owner, or they know that there are multiple creditors of the former owner who are looking for their share of the excess funds?
A. Pursuant to RSA 80:88, II, the town may file a lawsuit that is called a “Bill of Interpleader” in the Superior Court. Here, the town will deposit the excess money with the court, and the court will determine who needs to be notified about the funds, and will adjudicate the various claims to the money, and enter an order deciding who will receive what amount of money, if any. This process protects the municipality against the claims of parties who have dealt with the former owner.
Q. What if the municipality holds the property for more than three years before offering it for sale?
A. After the end of the three year period, the town has no duty to notify the previous owner, and the previous owner no longer has a right of redemption. At that point, all of the proceeds of a sale belong to the municipality.
Paul Sanderson is Staff Attorney for the New Hampshire Municipal Association. He may be contacted at 800.852.3358 ext. 3408 or at email@example.com.