Chapter 18 : Tax Foreclosures, Confirmation Suits, and Sales

• Library: Standards for Examination of Real Estate Titles in Arkansas (2021 Ed.)

CHAPTER 18: TAX FORECLOSURES, CONFIRMATION SUITS, AND SALES

Standard 18.1 Tax Foreclosures or Confirmation Suits

1. Land on which taxes have not been paid for one year following the date the taxes were due is forfeited to the State and transmitted by certification from the county collector to the Commissioner of State Lands for collection or sale.²⁴³ Until certification occurs, the taxes on the tract may be paid to the county collector; after certification, the taxes can no longer be paid to the county. On the Commissioner's receipt of the certification, title to tax delinquent land vests in the State of Arkansas.²⁴⁴ After certification to the State of Arkansas, and until 10 business days after a sale to a third party, either the owner or redeemer may redeem the tax-delinquent land from the Commissioner of State Lands.²⁴⁵ However, after the period to redeem the taxes has expired following a sale to a third party, title to the real property may not be marketable unless the third party purchaser either: (1) acquires a deed from the last record owner who lost the property due to delinquent taxes; or, (2) prosecutes a successful adversarial proceeding to have title confirmed in them. Even after entry of a decree confirming title in the third party purchaser, there remains the possibility that certain persons may appear and contest the confirmation of title for an indefinite period of time.²⁴⁶
2. When the record indicates that a tax forfeiture to the State has occurred but thereafter the tract is returned to the county real estate tax roll, and taxes are shown to have been collected from year to year since that time, the redemption deed from the Commissioner should be recorded.²⁴⁷ Otherwise, it may be presumed that there has been a redemption unless the abstract discloses a tax deed to a third party. Nevertheless, the examiner should require that a disclaimer be obtained from the Arkansas State Land Commissioner.
3. Effective July 1, 2021, third-party purchasers must be an individual or entity with a "home of record" located within the United States.²⁴⁸ If it is determined that a tax delinquent parcel previously certified to the Commissioner of State Lands has been purchased by an individual or entity whose home of record is outside of the United States, the deed shall be cancelled by the Commissioner of State Lands within three business days of the determination; all money paid for the parcel is deemed forfeited to the Commissioner of State Lands; and the parcel is immediately recertified as tax-delinquent.²⁴⁹
4. Notwithstanding Ark. Code Ann. §§ 26-37-101-316, title to lands acquired solely by tax forfeiture and subsequent sale by the State Land Commissioner should be carefully reviewed. Tax deeds have been set aside by courts for failure to strictly comply with the statute. Assessor and collector procedures often fail to meet the standard set by appellate courts. For example, both inadequate legal descriptions²⁵⁰ and inadequate notice²⁵¹ have been used as the basis to invalidate tax deeds.

Standard 18.2 Required Notice

The Commissioner of State Lands is required to serve notice to the owner at the owner's last known address as certified by the county and to all interested parties as identified by the Commissioner by certified mail.²⁵² If the notice by certified mail is returned unclaimed or refused, the Commissioner of State Lands shall mail the notice to the owner or interested party by regular mail.²⁵³

If the notice by certified mail is returned undelivered for any reason, the Commissioner of State Lands shall send a second notice to the owner or interested party at any additional address reasonably identifiable through the examination of the real property records as follows: "the address shown on the deed to the owner; the address shown on the deed, mortgage, assignment, or other filed and recorded document to the interested party; or any other corrected or forwarding address on file with the county collector or county assessor."²⁵⁴

The terms "owner" and "interested party" include anyone holding an interest in the subject property by virtue of a bona fide recorded instrument at the time of certification.²⁵⁵ An "owner" also includes every owner of the property if the property is owned by joint tenants and either the husband or the wife if the property is owned by tenants by the entire-ty.²⁵⁶ The Commissioner is not required to notify any person whose title or interest in the property (1) is obtained after certification; (2) is expired, barred, released; or (3) was otherwise terminated before the date of sale, regardless of whether a bona fide recorded instrument reflects the termination of the title or interest.²⁵⁷

Standard 18.3 Contests

Subject to certain exceptions, an action to contest the validity of the sale of tax delinquent lands must be commenced within 90 days of the date of the conveyance.²⁵⁸ The first exception provides "a person suffering a mental incapacity, a minor, or a person serving in the United States Armed Forces during time of war during the 90-day period" must commence an action within two years of the disability being removed, the age of majority being reached, or release...