Legal Question in Real Estate Law in California
Issues With Tax Default Land Sale
I am interested in acquiring a property in a property tax default land sale from a county in California. I understand that the title will be cleared from any liens such as mechanic liens, trust deeds, etc. with the exception of State Tax or Federal Tax liens. Is this true ?
I checked at the County Recorder but could not find any State/Fed liens. How do I ascertain that there is indeed no other senior liens on the property ? What other possible gotchas could there be ?
To evict the existing owner or tenant, would this be an ''unlawful detainer action'' ?
I understand that the existing owner has upto 1 year to file a suit against the County challenging the sale. What is the maximum downside for the purchaser of the land if the County loses. Will he lose the property ? Will he get the monies back ?
I also understand that the banks would not loan any mortgage against the property and no title insurance company would insure it. Would this be true for the 1st year only. Can the purchaser pursue a quiet title action suit ? And if so, would the property then be title insurable and mortgageable ?
Thank you very much for your answers.
1 Answer from Attorneys
Re: Issues With Tax Default Land Sale
Your information is pretty good, and if you want to read the applicable law itself, look up Revenue and Taxation Code sections 3691 - 3731, especially noting sections 3711, 3712 and 3725-3727.
Generally, a tax deed conveys property free of liens created prior to the sale with the exceptions noted in subsections (a) through (h) of section 3712.
I would guess, without knowing, that some title companies would insure tax-deed property after an investigation into the circumstances. The applicant would probably be required to pay for a title investigation in advance.
The same would be true of lenders, except that marketplace is a lot more diverse than the title insurance market and you can probably finance some portion of the purchase price or building costs, but the terms may depend upon the lender's level of concern about adverse facts.
If the occupants came into possession legally, e.g. as owners or tenants, unlawful detainer would be the way to remove them; otherwise, consult a lawyer about ejectment and trespass.
If financing or insurance is an important part of your game plan, you should get commitments in advance after full discussion with the proposed lenders or insurers.
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