Everyone’s out to make money, and investors want to squeeze every penny out of each investment. As with anything else in Real Estate, though, the cheapest up-front option may lead to delays or increased expenses down the road. No one is psychic, but it pays to listen to those who have already been burned! Continue reading for our explanation about the risks of relying on prescription for your tax deed, and if you have specific questions, you can always book a one-on-one consult/evaluation by contacting our office or by clicking here.
If you’ve been keeping up with our tax deed articles over the years(here, here, here, here, here, and here), you know that there are two basic steps to obtaining clear, marketable title to a property you acquired at a Georgia tax sale. Step 1 is the foreclosure of the right of redemption (a/k/a the “Barment”). Step 2 is the quiet title case, where judge rules that you have complied with the barment rules and that you now hold clear title to the property. Each step costs money, and investors like to save money where they can.
Enter O.C.G.A. §48-4-48, which, for more recent tax deeds, provides “A title under a tax deed properly executed on or after July 1, 1996, at a valid and legal sale shall ripen by prescription after a period of four years from the recordation of that deed in the land records in the county in which said land is located.” The statute goes on to say “ a tax deed which has ripened by prescription pursuant to any provision of this Code section shall convey, when the defendant in fi. fa. is not laboring under any legal disability, a fee simple title to the property described in that deed, and that title shall vest absolutely in the grantee in the deed or in the grantee’s heirs or assigns. In the event the defendant in fi. fa. is laboring under any legal disability, the prescriptive term specified in this Code section shall begin from the time the disabilities are removed or abated,” and that “Notice of foreclosure of the right to redeem property sold at a tax sale shall not be required to have been provided in order for the title to such property to have ripened under subsection (a) or (b) of this Code section.”
Well that sounds great, right? Reading this code section, it sounds like if you just sit on the property for 4 years, you can just skip over the barment process, right? The title “ripens by prescription” after 4 years, right? Well, it can, but words are important; What does “prescription” mean? This is where we’ve had to break many investors’ hearts.
“Prescription” is just another term for “adverse possession.” Briefly, adverse possession is a claim to ownership of a property established by continuous, open, notorious, exclusive possession for a given period time. In the case of modern tax deeds, that time period is 4 years.
So, what does that mean for Georgia tax deed investors? Basically, it means that unless you’ve been in actual possession of the property for 4 years, you’ll have to bar the right of redemption anyway.
Let’s consider a few scenarios:
- Vacant lot/raw land: The caselaw is clear that simply owning the property and paying taxes on it does not constitute notorious possession. A Court will look at whether you enclosed the property, cultivated it, etc.. A case from all the way back in 1901 (McCook v Crawford, 114 Ga. 337) says that the possession of the property must be so notorious (visible) “as to attract the attention of adverse claimants.” The Court goes on to say that if the land is of a type that isn’t fit for cultivation, occupancy, enclosure, etc… (or if it is simply cost prohibitive to do so), then “the property cannot be acquired by prescription, because, when the character of the property is such that it is impossible to be in actual possession thereof, title thereto can pass from one to another only by written evidence of title.” If you can’t “show” your possession, then there is no prescription.
- Occupied building: If the property is occupied, then your interest in the property is subject to that occupant’s right of redemption. You don’t have good/exclusive access to the property while it is occupied. Basically, your tax deed gives you an incomplete interest in the property, and does not vest you with an immediate and exclusive right to possess the property. Accordingly, your possession, if shared with an occupant, is not continuous or exclusive. No prescription here, either.
- Vacant building: First, you may have difficulty distinguishing between a vacant or “occupied” structure, especially if there is personal property (“junk”) stored on the premises. There have been cases where personal property storage has been considered “occupying” a property, which puts you back in the “occupied building” category. But, assuming the property is truly vacant, you can arguably access the property to secure, protect and maintain the building, assuming that such activity doesn’t “lock out” any rightful occupant. Those actions cost money, and you’re going to be sitting on that money for at least 4 years. Also, if, in month 46, someone comes along to redeem the property from you, then you’ve wasted that money, and had both your bid amount, and the “securing the property” money tied up for all that time. Not a good option, and not as much of a cost savings, either.
Finally, assume that you’ve provably and noticeably possessed the property for 4 years; now you still have to file your quiet title case, and come up with a way to prove all that to a judge. Rather than a simple stack of papers showing the barment notices, you’re going to have pictures and testimony showing your possession, and you’ll have to convince the judge of the dates, times, and truthfulness of that evidence. The quiet title case based on prescription is messier, takes longer, relies on predicting a judge’s threshold for what he/she will consider “possession,” has an uncertain outcome, and you’ve had to wait 4 years to get there anyway. Saving a buck up front can be risky and expensive.
Most barments, if you’re hiring them out to a law firm, will cost less than $2,000-$2,500. You can move forward with them sooner than “ripening by prescription” (12 months, rather than 4 years), and the eventual quiet title case is much cleaner. While barments are not cheap, the risks involved with trying to show “ripening by prescription” simply aren’t worth it.
When an investor contacts us and tells us that they’ve waited 4 years, they normally believe that the passage of time was all that was required. They mistakenly believe that “by prescription” is legal code for “automatically.” We find that most of our investors who have waited 4 years still find it cheaper and cleaner to go ahead and do the barment anyway, and they wish they would have known that from the outset.
As always, if you have questions about Georgia Tax Deed or other Georgia Real Estate issues, please reach out, and let us know. We do offer paid one-on-one consulting sessions to tax deed investors so that you can ask property-specific questions, and see how we evaluate the best approach to obtaining clear title. Please just reach out if we can be of any help.