• Action to Quiet Title for Property Purchased at Tax Foreclosure Auction
  • May 15, 2015 | Author: Scott M. Brookens
  • Law Firm: Smith Haughey Rice & Roegge, P.C. - Grand Rapids Office
  • In Michigan, if property taxes and assessments go unpaid, officials in the county in which the property is located have authority to place a tax lien on the offending property. In the event interested parties fail to extinguish the tax lien in a timely manner, the county may recover all unpaid taxes and costs by foreclosing on the lien and subsequently selling the delinquent property.

    The Michigan legislature has detailed the tax foreclosure process and the county’s corresponding authority in the General Property Tax Act (GPTA). The GPTA outlines the requirements that county officials must follow in order to properly foreclose on a delinquent property. Failure on the part of the county to strictly adhere to these statutory guidelines may open the door for prior interest holders to attack the validity of the tax foreclosure sale. In some cases, Michigan courts have invalidated auction sales on tax foreclosure properties where the county failed to provide proper notice of the impending foreclosure. See In re Treasurer of Wayne Cnty. for Foreclosure, 478 Mich. 1, 732 N.W.2d 458 (2007).

    Because of the risks associated with tax foreclosure properties, title companies are often unwilling to provide title insurance policies for subsequent transfers. However, a title company will provide title insurance for subsequent transfers if the purchaser of a property at a tax sale auction clears title to the respective parcel. One way to clear title is through a quiet title action.

    In order to clear title to property purchased at a tax sale auction, the purchaser must bring an action to quiet title in the circuit court situated in the county in which the property is located. The goal of such an action is to vest title to the property in the purchaser forever as against all of the parties that held an interest in the property immediately prior to the tax foreclosure. The first step in the quiet title process is to conduct a title search on the property and identify all of the parties that held an interest in the property prior to the foreclosure. Each of these parties should be named in the quiet title action.

    Second, a complaint must be filed with the appropriate court, setting forth the basis for the plaintiff’s claim to the property, requesting that the court quiet title to the property in the plaintiff/purchaser forever as against all named parties. The complaint must establish that (a) the plaintiff purchased the property from the county at a tax foreclosure auction and (b) the county properly foreclosed on the property.

    Third, once the complaint is filed and served, the named parties have an opportunity to answer the complaint and articulate why their interest in the property should not be extinguished. If a defendant attempts to argue that the county did not properly foreclose on the property, the plaintiff may be in for a protracted legal battle. However, at this point in a quiet title action, many parties do not contest the matter and some fail to respond or otherwise answer in any manner. If a party fails to respond, default will be entered and the plaintiff will be able to seek a default judgement from the court, granting the requested relief. In Michigan, in order to obtain a default judgement quieting title to real property, the plaintiff must serve all defendants in default with notice of the plaintiff’s intent to obtain a default judgement. The court generally holds a hearing in which defaulted parties have one final opportunity to appear and present defenses to their default. Barring any unusual or extraordinary circumstances, at such hearings the court generally grants the requested relief.

    Finally, upon obtaining a favorable ruling and receiving a sealed and certified judgment quieting title from the court, the plaintiff must record the judgment with the register of deeds in the county in which the property is located. Once the judgment has been recorded, title to the property is vested in the purchaser forever as to the parties named in the quiet title action. At this point, title companies will be willing and able to provide title insurance policies for subsequent transfers of the parcel.

    Although it may seem like an extensive process, uncontested quiet title actions can be relatively painless. Furthermore, there are fewer contested actions now that county governments have streamlined the foreclosure process. Thus, if you have purchased or plan to purchase a property at a tax foreclosure auction, do not let apprehension about the process hold you back from properly clearing title to the property.