Working in the field of real estate law, much of what we do is preventative. To people who are careful, hire a real estate lawyer, and get everything right the first time around, the dangers involved in real estate transactions might feel very abstract. Make no mistake: the dangers are very real.
One such danger is the threat of a quiet title lawsuit.
What Is A Quiet Title Lawsuit?
Let’s set the scene with an example scenario…
A quiet title lawsuit starts, as do most of our cases, with the sale of property. This property would be bought at a tax sale. Of course, if you’re buying a new piece of property, it is absolutely imperative that you purchase title insurance. However, many insurance underwriters will be hesitant to issue a title policy if the property is to be purchased via tax sale. And many banks will be wary of granting financing if a property has been purchased through a tax sale.
So, what is tax sale?
A tax sale occurs when the owners of a property have stopped paying property taxes. In these cases, the governmental authority will arrange for the property to be sold to the highest bidder, thereby recovering their lost tax revenue. There are a few different ways that this can happen, but the punchline is that the governmental authority is made whole, and some lucky buyer out there aquires a secure investment at minimal market risk.
So why wouldn’t an insurance underwriter want to issue title policy for a tax sale?
Because a tax sale implies that the true owner(s) of the property, in some cases, may not have been notified of this sale. Failing to notify a property owner that their property is going to be sold is against the law, but it’s not an uncommon occurrence. Why? Because it is often the case that the local governance has been unable to find the true owner of the property. If the owner is MIA, the sale will happen according to schedule. These sorts of scenarios often occur when there has been a death, leaving numerous heirs to the property.
If this is the case, one of these property owners or heirs could very well show up ‘out of the blue’ and contest the sale. They would only need to claim that they had not been given proper notice of the sale to have a viable case. In situations such as this, the sale could very well be overturned.
As you may recall, title insurance would protect you from issues with your property arising from irregularities with the title (or deed). This is a perfect example of when issues with a title can be detrimental to the sale of a property. The trouble is that insurance companies often don’t want to issue title insurance for tax property sales because they know that it’s a gamble. Their job is to minimize their own risk.
So what do you do? How can you safely purchase a property through a tax sale? And how can you obtain financing and insurance for this property?
The answer is a quiet title lawsuit.
As the name suggests, a quiet title lawsuit has the effect of seeking out and dealing with any issues that might arise from problems in the chain of title. To do this, you’ll need to hire a good real estate lawyer. Your lawyer will put all potential owners of the property on notice of the impending sale through local publications. If nobody steps forward within a reasonable amount of time, the courts will step in and issue an order declaring ownership of the property. (Spoiler alert: you’re going to be the owner.)
Once you’ve done this, insurance companies from far and wide will breathe sighs of relief and happily give you title insurance. And banks everywhere will shrug and give you the mortgage you need. But none of it would be possible without a good real estate lawyer. And luckily for you, we know a guy.
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