[WSBARP] Sale of Property Purchased at County Tax Sale

[Bickel, Dwight]

I agree with John McCrady’s recommendations that would reduce the risk of a challenge to the validity of a tax sale and increase the likelihood that a tax sale purchaser could obtain title insurance for a new loan or next purchaser. However, attorneys giving advice about future insurability should not rely upon those, or three years, as absolute assurance that title insurance will be offered.

A voluntary deed from all people whose interests were foreclosed is the best method to eliminate a challenge to the validity of a prior tax sale. There is still a risk of challenge from prior lienholders, which may be accepted by a title company if the service of process is perfect. Other than a deed, John’s other suggestions might not be acceptable to a particular title company.

A quiet title decree is only significant reduction of the risk of a later challenge to the prior sale if there is actual service of process on the prior owners. Just like the prior foreclosure itself, a QT Decree based upon only service by publication, does not extinguish the risk of subsequent challenge based upon lack of process.

On a couple occasions I have accepted an attorney opinion letter regarding the effectiveness of the prior tax sale (valid procedures and propriety of actual service on all parties). An opinion letter, or the Certification from Tax Title Services, only reduce a small portion of the risk based upon compliance with the foreclosure statutes and may not be enough to convince a title company to assume the risk. The duty of defense provided by title insurance is extremely expensive to the title companies even if the tax sale purchaser succeeds. Would you advise your client who purchased at a tax sale, and who does not have a title insurance policy, to give a Warranty Deed to the next purchaser? Well, neither would I.

Other than a deed from all persons who held ownership at the time of the prior tax sale, or a QT Decree based upon actual service of process, the most reliable risk reduction is TIME. However, be aware the most relevant statutory time period is SEVEN years, not three. Hundreds of times I have told customers and attorneys that they may not be able to obtain title insurance based upon the validity of a tax sale until they have possessed the property and paid all the taxes for seven years.

The three-year period provided by RCW 84.64.070<http://apps.leg.wa.gov/rcw/default.aspx?cite=84.64.070> is not a redemption period, nor a statute of limitation to a challenge. It provides a right to set aside a tax sale only for minors and incompetents.

People who have lost their property by tax sale can challenge a tax sale on any basis later than three years if they can challenge the procedures or the service of process of the county. In my experience, if they lost substantial equity, a Judge will be motivated to find a basis to reopen the case, whether the case is the tax foreclosure or a subsequent QT Decree, based upon procedural due process. Setting aside an Order of Default based upon service of process by publication should be easy. Note that if a tax sale is set aside, the purchaser at the tax sale has no recovery from the county.

See RCW 7.28.050<http://apps.leg.wa.gov/rcw/default.aspx?cite=7.28.050> as a bar to a subsequent action to challenge a prior tax sale based upon open and notorious possession for seven years. Also see RCW 7.28.070<http://app.leg.wa.gov/RCW/default.aspx?cite=7.28.070> [with actual possession] and RCW 7.28.080<http://app.leg.wa.gov/RCW/default.aspx?cite=7.28.080> [applicable to vacant land] as bars to any subsequent action claiming title for any reason if the other person claims pursuant to “color of title” [the tax sale deed] and payment of taxes for seven continuous years.

Dwight A. Bickel
Regional Counsel
Fidelity National Title Group
Legislative Committee Co-Chair
Washington Land Title Ass'n
701 - 5th Avenue, Suite 2300
Seattle, WA 98104
Phone: (206) 370-3189
E-mail: Dwight.Bickel at fntg.com<blocked::mailto:Dwight.Bickel at fntg.com>

copies:  Jim Blair, Legislative Committee Co-Chair
            Stuart Halsan, WLTA Lobbyist
            Dave Lawson, WLTA President



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