TAX SALE FORECLOSURES IN MISSOURI AND KANSAS: PROTECTING YOUR COLLATERAL Tax foreclosure sales and the manner in which properties are sold and later redeemed are as varied within each state as they are nationwide. This article is not meant to be exhaustive or to give legal opinions or advice, but will provide a brief overview of the particular Missouri and Kansas tax foreclosure procedures that affect lenders and their rights in and to their collateral. KANSAS TAX SALE PROCEDURES Chapter 79 of the Kansas Statutes Annotated provides the procedure for tax sales of real property. Generally in Kansas, the County in which the taxes are owed first holds its own private sale, which is primarily for the benefit of the delinquent tax property owner. At the County’s first private sale, if the property owner does not pay the delinquent taxes, the County will “bid off” the property and the property is “purchased” by the County for the amount of the delinquent taxes. After the property is “bid off” by the County, the delinquent property owner has anywhere from one to three years to redeem the property (1-year redemption for abandoned property, 3-year redemption period for homestead property). Mortgagees and their assigns are included in the parties entitled to redeem the property during this period. If the property is not redeemed, the County will file a civil suit, similar to a mortgage foreclosure action. The County is required to issue summonses to all persons having or claiming to have an interest in the property, including mortgagees. Upon the conclusion of the civil tax suit, the properties that will be sold at auction, and the time and place of the auction, are published once a week for three consecutive weeks in the County publication. The property may be redeemed at any time prior to the auction by the property owner or mortgagee. However, property owners are prohibited from purchasing the property at the auction, whereas mortgagees may bid in and purchase the property at that time. A confirmation hearing is held sometime after the auction, as set by the County. If the sale of the property is confirmed, a sheriff’s deed will be issued and all other liens of record will be extinguished. The existence of a federal tax lien on the property may delay the issuance of a sheriff’s deed until after the federal redemption period has expired, which allows the federal agency additional time to redeem the property. Once the federal tax lien redemption period expires and the agency has not redeemed, the sheriff will then issue a deed to the property. Once the sheriff’s deed is issued, there is no right to redeem the property. For twelve months following a tax foreclosure sale a legal challenge may be made to the validity of the sale due to procedural defects by the County, such as improper notice of the sale. MISSOURI TAX SALE PROCEDURES Missouri tax sale procedures are generally divided into three categories: the general delinquent tax statutes, first class counties electing not to operate under Chapter 140 of the Missouri Revised Statutes, and the Land Reutilization Act of St. Louis City. General Delinquent Tax Statutes The general delinquent tax statutes in Missouri are governed by Chapter 140 of the Missouri Revised Statutes. These tax sales are generally non-judicial. A tax sale in counties that are governed by Chapter 140 takes place after three years of delinquent taxes. The County publishes a list of delinquent tax properties subject to sale for three consecutive weeks in a County publication. If the property does not sell at the first offering, the County will offer a second sale one year later. If the property does not sell at a second offering, the County will offer a third sale one year later. If the property sells at either the first or second offering, the redemption period is one year. If the property sells at the third offering, there is a 90-day redemption period. If the property does not sell at a third offering and the County subsequently offers it for sale thereafter, there is no redemption period. A purchaser at a tax sale conducted under Chapter 140 receives a certificate of purchase at the time of the sale. A deed to the property will not issue to the purchaser until the purchaser either makes an affidavit stating that a title search reveals no recorded liens or claims on the property or that at least ninety days before the purchaser is to receive the deed, the purchaser notified, by certified mail at the last known address, anyone that holds a publicly recorded interest in the property. Once the purchaser notifies the interested parties and files his affidavit with the County Collector, anyone with a recorded interest in the property has 90-days to redeem the property or be barred from later asserting an interest in and to the property. A challenge to the validity of the sale must be made within 3 years of the sale or be barred. First Class Counties Not Electing To Operate Under Chapter 140 of the Missouri Revised Statutes Counties that elect not to operate under Chapter 140 of the Missouri Revised Statutes are governed by Chapter 141 of the Missouri Revised Statutes. Generally, tax sales under this chapter are judicial. The County will file suit and upon judgment, the owner of the property has two years to redeem the property before the County may execute on the judgment (unless the property has been vacant for at least 6 months, at which time execution may be immediate). Redemption by the owner is generally barred after the sale. The County sends notice of the suit to persons named in the suit, which are generally the landowners, and publishes notice of the suit for four consecutive weeks in a County publication. After a judgment is entered and two years have passed with no one redeeming the properties, the County shall advertise notice of the sale for four consecutive weeks. The County shall also send notice of the sale, by certified mail to the last known address of the owner of the property. The County may also send notice to the last known address of a mortgage lien holder.1 After the sale, a confirmation hearing is held and evidence of the validity of the sale is received by the Court. Generally, notice of the confirmation hearing is also sent to interested parties. If the Court determines that proper notice was not given to interested parties, or if the sale was irregular, the Court will not confirm the sale and it will be re-offered for sale the following term. A party has twenty days from the date the sale is confirmed to appeal the confirmation of the sale. The deed given pursuant to the provisions of Chapter 141, RSMo. shall be presumptive evidence that the suit and all proceedings therein and all notices required by law were regular and in accordance with all provisions of the law relating thereto. After one year from the date of the foreclosure sale, the presumption shall be conclusive. No suit to set aside or to attack the validity of the deed shall be commenced unless the suit is filed within one year from the date of the sale. Land Reutilization Act: Missouri Revised Statutes 92.700, et seq. St. Louis City is governed by Missouri Revised Statutes 92.700, et seq. (the Land Reutilization Act). The Land Reutilization Act’s provisions are similar to the provisions of Chapter 141 of the Missouri Revised Statutes. In St. Louis City, the Collector of Revenue files a lawsuit which is served by summons on the owner and anyone holding an interest in the subject property, including lienholders. Ultimately, a judgment for foreclosure of real estate taxes is entered. Thereafter, a sheriff’s sale is conducted and the sale is afterward confirmed. There is 1 Providing notice of the tax sale to mortgage lien holders is optional pursuant to the language of the statute. Each county may differ in whether or not they exercise that option. no period of redemption once the sale is conducted and, once the sale is confirmed, it is difficult – although not impossible – to have it set aside. Similar to the provisions of Chapter 141, RSMo., the Land Reutilization Act requires that an appeal of the confirmation of the sale be commenced within twenty days of the confirmation judgment. The deed shall be presumptive evidence that the suit and all proceedings therein were regular. This presumption is conclusive two years from the date of the recording of the deed. Any suit attacking the validity of the deed must be initiated before the presumption becomes conclusive. CONCLUSION Both Missouri and Kansas tax sale statutes have provisions that protect a mortgage lienholder from inadvertently losing its collateral due to tax foreclosures. Such protections include notice of tax sales, redemption and purchase rights, and appeal rights. Each state’s tax sale procedures should be reviewed regularly by mortgage lenders to determine how best to protect its collateral before and after a tax sale occurs.
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