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Nebraska Supreme Court: Lack of “Mental Disorder” Stymies Delinquent Taxpayer’s Extended Redemption Claim

on Friday, 20 May 2022 in Dirt Alert: David C. Levy, Editor

Nieveen v. TAX 106, 311 Neb. 574 (2022).

Tax sales are a common method for counties to recoup unpaid property taxes in Nebraska.  Each county places an automatic lien on property within its boundaries for any unpaid property taxes.  Neb. Rev. Stat. § 77-1901.  The county can then sell its lien to a private party in the form of a tax certificate.  § 77-1818.

As this case demonstrates, however, that sale does not necessarily transfer ownership of the property.  Rather, the purchaser of the tax lien must wait a statutory time period, typically three years, to obtain title to the property.  If the taxpayer does not “redeem” the property within three years, the purchaser may apply to the county treasurer for a tax deed conveying ownership over the property.  § 77‑1837(1).

Sandra K. Nieveen failed to pay taxes on her property in Lancaster County, Nebraska.  The Lancaster County Treasurer sold a tax certificate for Nieveen’s property to TAX 106.  More than three years later, after TAX 106 had obtained title to the property via a tax deed, Nieveen challenged the conveyance. 

Nieveen acknowledged she had not redeemed her property within the three-year period.  Still, she cited a separate redemption right under section 77-1827.  That statute extends the redemption period to five years for “persons with an intellectual disability or a mental disorder.”  Id.  A qualifying mental disorder is one that prevents the property owner from either understanding his or her legal rights or from taking action to protect those legal rights.  Wisner v. Vandelay, 300 Neb. 825 (2018).

The district court rejected Nieveen’s challenge.  The Nebraska Supreme Court affirmed. 

As the Supreme Court found, Nieveen had at the time of the tax sale experienced “major depressive disorder” and “recurrent, severe, and generalized anxiety disorder.”  She acknowledged, however, her understanding of the need to pay bills and that there would be consequences if she did not.  Although she testified her mental health was the only thing keeping her from defending her rights, other testimony evinced different reasons as well, including her lack of money. 

The Supreme Court held section 77-1827 did not apply.  The three-year redemption period under section 77-1837(1) applied instead.  Because Nieveen had failed to redeem within that period, the tax deed lawfully transferred ownership.

Nieveen additionally challenged the tax sale on constitutional grounds.  She alleged it had violated her procedural due process rights and had constituted both a taking and excessive fine under the U.S. and Nebraska Constitutions.  The Supreme Court disagreed.

First, although the tax deed had deprived her of property, she had received adequate process.  The court cited her opportunity to present evidence at trial and her ability to remain at the property through trial.  Second, the court held it had already rejected Nieveen’s takings and excessive-fine claims in an analogous decision, Continental Resources v. Fair, 311 Neb. 184 (2022).

This case is a good reminder about the importance of accounting for property taxes in real-estate transactions.  Because unpaid taxes attach as superior liens to property, buyers may take subject to any predecessor’s tax obligation.  Buyers who fail to timely redeem that obligation risk losing their property to a tax sale.

Hannes D. Zetzsche

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