Vol. 2, No. 3 Law Publication 652 A Reprint from the Real Estate Center Journal Forced Sale Remedies By Judon Fambrough Rules governing tax sales differ 34.015(c) of the Texas Tax Code from those governing mortgage sales. (TTC). F oreclosure sales for delin- There is no equity of redemption Also, effective October 1, 2003, quent mortgage payments for delinquent taxes primarily be- the officer conducting a tax sale and, to a lesser extent, tax cause property taxes are not paid in must name the successful bidder sales for delinquent property installments, thus not accelerated. as the grantee in the deed. The taxes are commonplace in Texas. However, a tax sale can be avoided officer cannot execute the deed Not so commonly known, however, if the owner pays the delinquent to any other person in any other are the owners’ right to avoid a taxes plus any interest and penal- name. This means no one may foreclosure sale and even the right ties due before the sale. act as the agent for another at to redeem (or repurchase) property a tax sale. However, the statute sold at a tax sale. Right of Redemption speciﬁcally allows taxing units and The primary protection afforded anyone acting on their behalf to Equity of Redemption delinquent property taxpayers comes bid at the sale. after the tax sale under a concept Effective September 1, 2005, the One way to avoid a foreclosure requirements set forth previously in sale is an equity of redemption. known as a right of redemption. It gives the former property owner Section 34.0445 that took effect in Designed by the courts to promote 2003, apply only to counties with fairness, the equity of redemption the right to repurchase (or redeem) the property for a given time after a population of 250,000 or more allows the debtor to stop foreclosure or with a population of less than anytime between the acceleration of the tax sale. The redemptive price generally is the purchase or bid 250,000 where the commissioners the underlying note and the foreclo- court has adopted these require- sure sale. To do so, the debtor must price plus penalties, interest and other associated costs. ments for tax sales. pay the lender the entire underlying The successful bidder takes title indebtedness, interest and other costs The right of redemption arises solely by statutory authority. It subject to the former owner’s due at that time. right to redeem (repurchase) the Although the equity of redemption gives an incentive to the bidders to purchase the property at its property for a limited time. The was intended to aid the debtor, in Texas Constitution establishes two reality it did little because of the fair market value, thus lessening the chances of the former owner’s redemptive periods depending on the magnitude of resources required. type of property. A constitutional If sufficient resources had been redeeming it. In Texas, the right of redemption applies only to amendment that passed in Sep- available to retire the underlying tember 2003 sets a third two-year indebtedness, probably the debtor delinquent tax sales. There is no right of redemption for mortgage redemptive period for mineral would not have defaulted on a interests. much smaller installment payment. foreclosure sales. Anyone contemplating purchas- If the property is the residence More protection was needed. homestead of the delinquent tax- ing property at a tax sale should be aware of the provisions in the payer as deﬁned in Section 11.13 of Rights to Cure the TTC, or if the land is designated Texas Constitution and the Texas Consequently, in 1987, Texas Property Code as amended. agricultural use (ag use) as deﬁned legislators passed a law permitting in Section 23.51 of the TTC, the the residential mortgage debtor a Bidders and Purchasers redemptive period is two years. For second way to stop foreclosure. It all other property, the redemptive differs from the equity of redemp- at Tax Sales period is six months. tion because is arises before the Effective October 1, 2003, not debt is accelerated and only the everyone is eligible to purchase Redemptive Price amount in arrears must be paid property at a tax sale. According to The redemptive price for residen- the lender. Section 34.0445 of the Texas Civil tial or ag-use property (and possibly Effective January 1, 1988, the Practice and Remedies Code (CPRC), mineral interests) depends on when Texas Property Code provides that if the officer conducting the tax sale the redemption occurs and if the the deed of trust or other contract may not execute and deliver a deed property is sold to a third party lien is on real property used as the to the successful bidder unless he at the tax sale. If the property is debtor’s residence, the foreclosing or she exhibits an unexpired written sold, the redemptive price during creditor must give the debtor at statement from the local county the ﬁrst year is the total of: least 20 days to cure the default assessor-collector showing the before acceleration may occur. This person has no delinquent county, • the amount bid at the sale; gives the residential debtor-mort- school or municipal property taxes. • the recording fees for the gagor an opportunity to stop the The statement must comply with deed; foreclosure process by curing the the information speciﬁed in Section • the amount paid by the pur- amount in arrears only. chaser as taxes, penalties, interest and "costs" and November 1993 (Revised September 2005) REAL ESTATE CENTER JOURNAL • a 25 percent redemptive premi- percent redemptive premium Texas residential mortgage debtors um based on the aggregate total during the second year. can save their homes from foreclo- of the ﬁrst three items. The redemptive price for all sure in two ways. They must act If the same property is redeemed other property parallels that paid before the foreclosure sale occurs, the second year, the redemptive for residential or ag use. The only however. After a tax sale of a price remains constant except a 50 exceptions are the: residential homestead or agricultural percent, not 25 percent, redemp- • redemptive period is 180 days land, prior owners have up to two tive premium is assessed. after the deed is ﬁled and years to repurchase their property. The term "costs" is defined The redemption period for all other • redemption premium to a property is six months. in Section 34.21 of the TTC to purchaser other than a taxing mean the reasonable amount the During the 77 th and 78 th Tex- unit cannot exceed 25 percent as Legislatures, two new rights purchaser spent for maintenance, (Section 34.21[d]). preservation and safekeeping of of redemption were added. The Note. The statute contains some ﬁrst deals with the foreclosure of the property during the redemption discrepancies between Section residential property by a property period including the cost of: 34.21(d) cited above and Section owners association for nonpayment • insurance; 34.31(b). The latter provides that if of assessments. The other grants • repairs or improvements re- property other than residential or landowners the right to repurchase quired by local ordinance or ag use is sold at the tax sale, the condemned land when the public building code, or by a lease redemptive price is the great of: use expires. in effect on the date the • the amount of the judgment, property was sold; Redemption from Property • the "costs" and • discharging a lien imposed Owners Associations by a municipality to remedy • an amount equal to 25 percent of the ﬁrst two items, or Effective January 1, 2002, own- a health or safety hazard on the property and • the amount of the bid price ers whose residences are taken and by foreclosure for nonpayment of • impact or standby fees im- posed under the Texas Local • an amount equal to 25 percent assessment fees have 180 days to Government or Water Code of the bid price. redeem the property after receiving that are paid to a political If the ﬁrst list of items exceed notice from the property owners subdivision. the second and the purchasesr re- association. The redemptive price ceives more than 125 percent of depends on whether the property If the residential or ag-use property owners association or a third party is not sold at the sale because of the bid price, the excess goes to the taxing units. purchases the property at the sale. an insufficient bid, it is "bid off" For more information, see Center to a taxing unit that is a party When the property is sold, the redemptive price is paid to the publication number 1548, “Legisla- to the judgment (Section 34.01 of ture Limits POA Power.” the TTC). The property may still purchaser. However, if the purchaser be redeemed. The price though, is cannot be found or is uncooperative, the total of: the former owner can tender the Redemption • the amount of the judgment necessary amount to the county from Condemnors assessor-collector. The assessor- Effective January 1, 2004, land- against the property or the collector will give the former owner owners whose real property is con- market value as speciﬁed in a signed receipt witnessed by two demned by a political subdivision the judgment, whichever is persons. The recording of the receipt have the right to repurchase if the less; gives notice to all persons that the public use for which it was taken • the recording fees for the property has been redeemed. decuments and expires within ten years. The land- The right of redemption is a owner must repurchase within nine • the amount of the "costs" nonpossessory interest in the land. months after receiving notice of the outlined earlier. It does not give the former owner expiration of the public use. The Finally, if the residential or ag- the right to use or possess the redemptive price is the fair market use property is "bid off" to a taxing property nor the right to receive value of the land at the time of unit and the taxing unit sells it to rents, income or other beneﬁts from the reacquisition. For more details, a third party, the redemptive price the property while the redemptive see Center publication number 394, is a total of: right exists. “Understanding the Condemnation • the amount paid the taxing Not addressed is the purchaser’s Process in Texas.” unit by the purchaser, right to recover the value of im- This article is for information provements added to the property • the recording fees for the only; it is not a substitute for during the redemption period not legal counsel. documents; included by "costs." No constitu- • the amount paid by the pur- tional, statutory or case law appears chaser as taxes, penalties, Fambrough is an attorney, member of the to authorize such recovery. Conse- State Bar of Texas and a senior lecturer with interest and "costs" and quently, the purchaser should be the Real Estate Center and in agricultural • a 25 percent redemptive pre- hesitant to add improvements until economics at Texas A&M University. mium during the ﬁrst year on the redemptive period ends. the ﬁrst three items or a 50 MAYS BUSINESS SCHOOL Texas A&M University http://recenter.tamu.edu 2115 TAMU 979-845-2031 College Station, TX 77843-2115 Director, Dr. R. Malcolm Richards; Associate Director, Gary Maler; Chief Economist, Dr. Mark G. Dotzour; Communications Director, David S. Jones; Associate Editor, Nancy McQuistion; Assistant Editor, Kammy Baumann; Assistant Editor, Ellissa Brewster; Art Director, Robert P. Beals II; Graphic Designer, JP Beato III; Circulation Manager, Mark W. Baumann; Typography, Real Estate Center. Advisory Committee Tom H. Gann, Lufkin, chairman; Douglas A. Schwartz, El Paso, vice chairman; Joseph A. Adame, Corpus Christi; David E. Dalzell, Abilene; Celia Goode-Haddock, College Station; Joe Bob McCartt, Amarillo; Catherine Miller, Fort Worth; Nick Nicholas, Dallas; Jerry L. Schaffner, Dallas; and Larry Jokl, Brownsville, ex-ofﬁcio representing the Texas Real Estate Commission. Tierra Grande (ISSN 1070-0234) is published quarterly by the Real Estate Center at Texas A&M University, College Station, Texas 77843-2115. Subscriptions are free to Texas real estate licensees. Other subscribers, $20 per year. Views expressed are those of the authors and do not imply endorsement by the Real Estate Center, Mays Business School or Texas A&M University. The Texas A&M University System serves people of all ages, regardless of socioeconomic level, race, color, sex, religion, disability or national origin.
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