Tax Deed Purchasers Beware: Due Diligence is Required
In a split decision, the Indiana Court of Appeals recently affirmed a trial courts’ decision to revoke a tax deed. In David L. Jenner and Vickie Jenner v. Bloomington Cellular Services, Inc. and Crown Castle South LLC, the majority of the Court determined that because the tax sale purchasers failed to notify interest holders outside the chain of title, they did not comply with the Indiana tax-sale statute, and were therefore not entitled to a tax deed for the property.
The property at issue was acquired by Bloomington Cellular Services, Inc., in 1988, (“BCS”) and its title interest was properly recorded. BCS subsequently merged with Westel Indianapolis Company (“Westel”), but Westel’s name was never substituted on the property’s title.
In 1999, Westel leased the operation and maintenance of a cell tower on the Property to Crown Castle South, LLC (“Crown Castle”) and in 2000, Crown Castle recorded a supplemental lease agreement outside the Property’s chain of title. Similarly, when Crown Castle subleased the cell tower to T-Mobile in 2009, the sublease agreement was also recorded outside the chain of title. Crown Castle installed a prominently-placed sign on the Property, including its name and contact information, identifying it as the operator of the cell tower.
In 2014, the Property was included in Monroe County’s tax sale, and the Jenners purchased the tax sale certificate. As required by the tax sale statute, the Jenners conducted a title search and found only the interest of the original title owner, BCS. The Jenners provided notice of the tax sale to BCS and no redemption was made. In November 2015, Monroe County issued a tax deed to the Property to the Jenners.
After obtaining the deed to the Property, the Jenners notified Crown Castle of their ownership of the Property, and Crown Castle attempted to negotiate its rights to the cell tower. Failing that, Crown Castle moved to intervene in the tax sale proceedings and filed a Trial Rule 60(B) motion to set aside the tax deed as void. Crown Castle argued that because the Jenners’ failed to notify Crown Castle, they did not substantially comply with the requirement to notify “the owner of record at the time of the sale and any person with a substantial interest of public record” in the Property, as required by Ind. Code § 6.1-25-4.5.
Crown Castle acknowledged that its lease from Westel was not in the chain of title, but nevertheless argued the Jenners should have conducted physical due diligence of the Property. Had they done so, Crown Castle argued, the Jenners would have seen Crown Castle’s sign and been prompted to inquire about Crown Castle’s interest in the Property.
The Jenners argued that because Crown Castle’s lease was outside the chain of title, they were not able to identify Crown Castle’s interest in the Property via the public record. Since the Jenners substantially complied with I.C. 6.1-25-4.5, including notifying the “owner of record at the time of the sale” and any persons in the public record who had a substantial property interest in the property, they urged the Court to treat them the same as bona fide purchasers for value.
The majority of the Court of Appeals rejected the Jenner’s argument, holding a tax sale purchaser cannot be a bona fide purchaser because their “purchase price” only gives them a right to engage in legal proceedings to obtain a tax deed if no redemption is made. The Indiana Legislature determined notice to “any person with a substantial interest of public record”, is required to gain title to tax sale property, in I.C.6-1.1-25-4.5(a). The majority held that the property interests of Crown Castle, despite being outside the chain of title, were “of public record” and thus the Jenners failed to comply with the statue. Visual inspection of the property at issue was not required, contrary to the trial court’s holding, but a thorough inspection of recorded documents inside and outside the chain of title is required.
So, although it is not necessary to physically inspect a property to determine who might have a substantial interest in tax sale property, tax sale purchasers are required to conduct very thorough due diligence of all public records in order to obtain a tax deed.
The Indiana Supreme Court declined review of the Court of Appeals decision.
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