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The Holder of a Tax Sale Certificate Controls the Method By Which a Home Owner May Redeem the Property

on Tuesday, 4 August 2015 in Dirt Alert: David C. Levy, Editor

Once the holder of a tax sale certificate files a judicial foreclosure action, the property owner cannot redeem the property by tendering the balance due on the tax certificate to the county treasurer. There are two statutory procedures through which the holder of a tax sale certificate can convert the certificate into a deed—the “tax deed” procedure and the “judicial foreclosure” procedure. The Nebraska Supreme Court, in Neun v. Ewing, 290 Neb. 963 (2015), held that the procedures are not interchangeable, and the holder’s election is binding.

Under the “tax deed” procedure, the holder may obtain a tax deed from the county treasurer. Alternatively, the holder may obtain a sheriff’s deed by electing the “judicial foreclosure” procedure, foreclosing on the tax lien and compelling the sale of the property. Regardless of which procedure the holder elects, the property owner may prevent the holder from acting on the tax sale certificate by timely redeeming the property. Nebraska Revised Statutes sections 77-1824 and 77-1917 provide separate procedures, requirements, and time limits for redeeming property. Section 77-1917, for example, unlike section 77-1824, requires the payment of costs and attorney fees. The question in Neun was whether the property owner could redeem using the procedure under section 77-1824 regarding tax deeds, when the holder of the tax certificate had already filed an action for judicial foreclosure to obtain a sheriff’s deed.

The property owners argued that section 77-1824 does not expressly prohibit a property owner from using this method of redemption during a judicial foreclosure. The property owners relied on KLH Retirement Planning v. Cejka, 3 Neb. App. 687 (1995). In Cejka, the property owner waited until the holder filed a foreclosure action and then attempted to redeem by tendering payment of taxes and interest due to the county treasurer. The holder argued the owner could not redeem while foreclosure was pending because the statute provided for redemption only after foreclosure. The Nebraska Court of Appeals held the owner could redeem the property while the foreclosure action was pending.

In Neun, the Nebraska Supreme Court distinguished the holding in Cejka. The Court found the Court of Appeals in Cekja considered only the timing of redemption—whether the property owners could redeem the property after the holder filed a foreclosure action—not the manner by which the property owner could redeem. To the extent one could interpret Cejka as authorizing redemption under section 77-1824, where the holder elected judicial foreclosure, the Nebraska Supreme Court expressly disapproved that interpretation. A property owner cannot redeem property under section 77-1824 after the holder has filed a foreclosure action. Instead, an owner must use the manner of redemption that section 77-1917 provides.

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