[WSBARP] Tax Deed/Sale Unique Situation

Wed Dec 14 14:52:34 PST 2016

Eric - Going off memory here - but you will want to look into an old line of Washington cases that address “virgin title” - that upon finalizing of the tax sale a new title is created as if prior title had never existed and thus all easements, adverse possession etc. are wiped out as if they never existed. The concept starts out strong back in the 1920s or so and then by the time we reach more recent times is watered down and there is more of a balance of equities rather than simply eliminating anything and everything from title post tax-sale. I vaguely recall that there is a reported case addressing a 1/2 house sold at tax sale; There are at least 2 reported decisions regarding a partial ownership (1 of several condo units) in a downtown Seattle athletic club that went to tax sale after WaMu managed to not pay the property taxes from an impound account and a client of mine bought it at tax sale. And there is a fairly good Law Review article specifically on Washington State tax sales - lots of good information in that. Sorry, I don’t have the cite handy. This fact pattern - a sale of 1 lot but not the other at tax sale and structures or improvements straddling property lines comes up rather frequently; in King County I would venture to say it happens every year. It’s a classic reason why something ends up at tax sale - you have multiple lots and someone loses track of at least 1. Happy to discuss further on the phone if you would like. 

Thank you, - Mark

__
Mark K. Funke, Attorney
P.206-632-1535
mark at funkelaw.com
www.funkelaw.com 
Licensed in Oregon & Washington

> On Dec 14, 2016, at 2:26 PM, Eric J. Dooyema <Eric at DooyemaLaw.com> wrote:
> 
> Thanks so much for the response…what I didn’t make clear is that the two parcels are about 1 acre and about 0.25 acre. The tax sale parcel is the smaller parcel. The house sits almost entirely on the larger parcel with a small portion of the attached garage on the smaller parcel. However, the septic system (tank and field) is entirely on the tax sale parcel. Again, thanks so much.
>  
> From: Eric Nelsen [mailto:Eric at sayrelawoffices.com] 
> Sent: Wednesday, December 14, 2016 2:19 PM
> To: Eric at DooyemaLaw.com; WSBA Real Property Listserv
> Subject: RE: [WSBARP] Tax Deed/Sale Unique Situation
>  
> If I remember my tax sale research right from five-six years ago, a property tax foreclosure wipes out ALL encumbrances on the land--mortgages, easements, everything. So I think third party owns that parcel. I'm not positive but you might research if the property tax foreclosure has any effect on statute of limitations for adverse possession. The ownership of the house also is in question, I think. If it is truly straddling the line in a fashion where it is ambiguous which tax parcel it should properly "belong" to, then it is a real muddle and I have no clue what to suggest in terms of who has true ownership.
>  
> I think the practical solution is for the buyer to order a preliminary commitment and see what the title company is willing to insure. I would bet that the title company is going to vest the foreclosed tax parcel with the third party buyer, and the other tax parcel with the bank, and have another exception about ownership of the house.
>  
> If someone wants to buy both parcels, I think the safest route would be to negotiate with the bank, and also contact the third party and offer them something, and use the fact of the third party's claim as leverage against the bank to reduce the purchase price from them. Then get deeds from both the bank and the third party.
>  
> Sincerely,
>  
> Eric
>  
> Eric C. Nelsen
> SAYRE LAW OFFICES, PLLC
> 1417 31st Ave South
> Seattle WA  98144-3909
> phone 206-625-0092
> fax 206-625-9040
>  
> Please Note that We Have Moved. We have moved our Seattle office to Mount Baker Ridge (a small commercial community just above the I-90 tunnel). Our new address is 1417 31st Avenue South, Seattle WA 98144. All other contact information remains the same.
>  
> From: wsbarp-bounces at lists.wsbarppt.com [mailto:wsbarp-bounces at lists.wsbarppt.com] On Behalf Of Eric J. Dooyema
> Sent: Wednesday, December 14, 2016 1:24 PM
> To: wsbarp at lists.wsbarppt.com
> Subject: [WSBARP] Tax Deed/Sale Unique Situation
>  
> This is going to read like an exam question…but any help would be most appreciated…
>  
> A house sits on two parcels; the property line goes through the house. The parcels have been owned in common since the house was built in the 1950s (and probably before). The last owner acquired both parcels in 2005 and took out a loan using both parcels (and the house) as collateral. In 2011, one of the parcels was sold at a tax sale for delinquent property taxes to a third party. In 2016, the bank foreclosed on both parcels and obtained and filed a Trustee Deed listing both parcels. According to the assessor the Bank owns both properties. Let’s assume that all proper notice and other requirements have been met.
>  
> A new party wants to buy both parcels from the bank.
>  
> Last fun fact, the tax sale parcel is landlocked.
>  
> 1. Did the bank have a right to foreclose on the tax sale parcel? 
> 2. Who owns the tax sale parcel now?
> 3. Will potential new buyer be able to get title insured on tax sale parcel in a purchase from the bank?
> 4. Any other issues or remedies that come to mind?
>  
> The facts that the house sits on both parcels and they were divided by the tax sale, it seems, are very unusual.
>  
> Please feel free to email me directly or call…thanks so much.
>  
> Eric at dooyemalaw.com 
>  
> Eric J. Dooyema
> Dooyema Law Office
> 624 W Hastings Rd Suite 12
> Spokane, WA 99218
> 509-474-1685  
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