HD10 - Delinquent Land Taxes
Executive Summary: Aside from bringing a suit in chancery to enforce a judgment lien obtained for delinquent taxes, the method available to a political subdivision to sell land upon which real estate taxes have become delinquent is the sale thereof by the local officer charged with such duty, resulting in the execution and delivery of the deed by the clerk of the court to the purchaser; the so-called "clerk's tax deed". Land titles derived therefrom have always been suspect, and proceedings are extremely cumbersome. As a result, the General Assembly at its 1972 Regular Session adopted House Joint Resolution No. 65, directing the Virginia Advisory Legislative Council to make a study of the procedures involved in the collection of delinquent land taxes. The text of the resolution is as follows: "House Joint Resolution No. 65 Directing the Virginia Advisory Legislative Council to study the laws concerning the collection of certain delinquent taxes. Whereas, the procedures provided by law for the collection of delinquent taxes on real estate have been in use for many years without major changes despite the new social and economic characteristics of the State; and Whereas, it is time for a review of these procedures to determine whether or not changes should be made therein while at the same time giving adequate protection to property owners; now, therefore, be it Resolved by the House of Delegates, the Senate concurring, That the Virginia Advisory Legislative Council is directed to make a study of the procedures for the collection of delinquent taxes on real estate so as to determine whether such procedures can be simplified and changes made therein, while at the same time giving adequate protection to property owners. All agencies of the State shall assist the Council upon request. The Council shall complete its study and make its report to the Governor and General Assembly not later than September one, nineteen hundred seventy-three." Edward E. Lane, a member of the House of Delegates, a member of the Council, and an attorney at law was selected as Chairman of the Committee to make the preliminary study and report to the Council. The following persons were selected to serve as members of the Committee with Mr. Lane: Sam T. Barfield, Commissioner of the Revenue, Norfolk; Leslie D. Campbell, attorney at law and a member of the Senate, Hanover County; John L. Gayle, attorney at law, Richmond; John R. Haymes, attorney at law and an assistant city attorney, Richmond; Dean A. Porter, Director of Finance, Fairfax County; Ford C. Quillen, attorney at law and a member of the House of Delegates, Gate City; and G. R. C. Stuart, attorney at law and a member of the House of Delegates, Abingdon. The Committee met and organized, and elected Mr. Stuart Vice-Chairman. The Division of Statutory Research and Drafting, the Virginia Advisory Legislative Council and the Office of the Attorney General made staff and facilities available for the study. A public hearing was held by the Committee in the State Capitol. Representatives of the Treasurers' Association of Virginia, the Virginia Savings and Loan League and life and title insurance companies attended the hearing and addressed the Committee. The Committee met and considered the suggestions made at the public hearing and suggestions made by members of the Committee itself. A locality, having obtained a judgment against the tax delinquent pursuant to § 58-1014, may bring a chancery suit for the purpose of having land sold in order to satisfy the judgment lien, in the same manner as other judgment liens are enforced. This proceeding is not involved in the problems which are the subject of this study and will not be discussed in this report, nor will this report contain any recommendations concerning that proceeding. This report is concerned with the proceedings for selling lands for the purposes set forth in Articles 2 through 7 of Chapter 21 of Title 58 of the Code of Virginia. These articles consist of §§ 58-1029 through 58-1117. In brief, these articles provide that the local treasurer shall sell delinquent tax lands at public auction. Provisions are made for the buyer to take possession of the land. If the land has not been redeemed by the owner within three years from the date of the sale, the purchaser may apply to the clerk of the court having jurisdiction for a deed conveying the land. However, he must give notice to the owner and certain other parties of his intention to apply for such deed. If the owner or any other person entitled to redeem the land has not done so within four months of the date of the notice, the clerk is required to then execute and deliver a deed conveying the land to the buyer. Persons under disability, whose land has been sold under this procedure, may redeem it by paying, within three years after the removal of the disability, the amount paid for the land to the buyer, together with all necessary charges incurred by the buyer in obtaining title and additional taxes which may have been paid by him, plus interest. Any land not sold at the treasurer's sale is required to be purchased by the treasurer "in the name of the Commonwealth" for the benefit of the political subdivision involved. Provisions are made for redemption of land so purchased in the name of and standing vested in the Commonwealth. Any lands purchased in the name of the Commonwealth under this procedure, and not redeemed by the owner within three years from the date of such "purchase" may then be bought by any person. A person interested in acquiring the property is required to file an application with the clerk of the proper court, whereupon notice is served on the owner and any other parties in interest to the title, with service by publication if necessary. If the land has not been redeemed within four months, the person making the application may, within five days after the expiration of the four months, buy the land by paying all necessary amounts to the clerk. The clerk is then required to execute and deliver a deed to the buyer. Lands "purchased by the Commonwealth", which have not been redeemed within three years from the date of the purchase, may also be sold by a proceeding by a bill in equity to subject the lands to the tax liens. Provisions are also made for sales of delinquent lands by town treasurers and execution and delivery of deed by the town clerk to the purchaser, and for purchase by the town treasurer for the town, of lands not sold at such sale. This is an extremely brief summary of the procedures involved. For the host of details involved in such a proceeding, reference is made to the Code sections which have previously been cited. Titles obtained by tax deeds under these proceedings are almost universally regarded as very weak titles and not being marketable. It is well known by people knowledgeable in real estate that title insurance companies are fearful of titles obtained through this type of tax deed and that they usually will not insure such titles. This was confirmed by a representative of Lawyers Title Insurance Company who appeared at the hearing. Lawyers Title insures titles obtained at a judicial tax sale but requires that an applicant for title insurance wait for twenty years before he can obtain a non-judicial tax title. There are two substantial reasons why tax titles are regarded as being disreputable. In the first instance, authority for these sales is wholly statutory, and they may easily be set aside if any deviation from the statutory procedure is made. Additionally, these large differences between land values and the for-sale price create a tendency in the courts to invalidate such sales for more or less minor errors. The Council, accordingly, now makes certain recommendations in its report to the Governor and the General Assembly. They are as follows: RECOMMENDATION 1. That, except for the provisions hereinabove mentioned providing for a judicial sale to subject the land to the lien of a judgment, the procedures be made uniform throughout the State. To achieve that end, the Council recommends: (a) that Articles 2 through 7 of Chapter 21 of Title 58 be repealed; that §§ 58-1027 and 58-1028, relating to the city courts and clerks having jurisdiction of the proceeding and validating charter provisions providing to the contrary be also repealed. In addition, the Council recommends a repeal of all charter provisions to the contrary. (b) that a new article be added in the chapter, providing another alternative proceeding to the above-stated proceeding which would still be available to the locality. The alternative would provide that after December 31 of the third anniversary of the due date of the taxes, the locality may proceed by bill in equity to subject the delinquent lands to judicial sale to enforce the real estate tax lien. The suit is to be conducted in accordance with the requirements prescribed for a creditor's bill in equity to subject real estate to the lien of a judgment creditor. The complaint in such suit is to be brought for the use and benefit of the locality in which the land lies. Any citizen, except those prohibited, may purchase the land at the sale. The owner is permitted to redeem the land by paying off the taxes, penalties and interest, court costs, and a reasonable attorney's fee set by the court before the date set for the sale. A "grandfather clause" is included to the effect that any suit or proceedings instituted under the provisions of the old law prior to the effective date of the repeal of those laws may be completed in accordance with such provisions. The procedures proposed to be repealed have been ineffective in removing lands from the delinquent tax rolls and placing them back into private hands with the resulting consequent revenue producing status. Even when these procedures result in a sale, the title derived therefrom is not accepted into the channels of commerce. The alternative procedure recommended by the Council, in lieu of those procedures recommended by it for repeal, probably would result in restoring more delinquent tax lands to a revenue producing status, and would produce titles which are good and marketable because they would be the result of regular judicial procedure. Moreover, the rights of the owners of the lands sold under such procedure would be enhanced, as, by virtue of the fact that a marketable, title can be quickly obtained under the new proposed procedures, more interest should be expressed by prospective buyers of these lands, with the result that a fund might be created for the benefit for such owner. CONCLUSION We extend our appreciation to the members of the Committee for the time and effort which they have given to the study of these problems and for the corrective measures which they have suggested. Legislation is appended to this report to carry out the recommendations of the Council. |
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