Spend time traveling around your local parish and you’re bound to spot a considerable amount of blighted properties. Often marked by overgrown front lawns, decaying exteriors, and seemingly devoid of inhabitants, blighted properties are a very visible issue faced by communities across Louisiana. Most of these properties are listed as adjudicated, having had liens placed on them for nonpayment of taxes. While it is certainly true that not all adjudicated properties are blighted, the risk of adjudicated properties becoming blighted increases the longer the properties are left to sit awaiting purchase at annual tax sales. In recent years, parishes around Louisiana have had difficulty returning these adjudicated properties to commerce. East Baton Rouge Parish alone counts over 6,000 adjudicated properties waiting to be returned to commerce, Caddo Parish has over 9,000 of these properties.
In a housing market that thrives on the popularity of fixer-upper properties, buying adjudicated properties at tax sales to prevent them from becoming blighted should be attractive. However, in the last decade, purchasing and insuring an adjudicated property within Louisiana has become prohibitively risky.
What’s the risk?
Special considerations must be made when purchasing adjudicated properties at a tax sale. Unlike typical property sales, in which the original property owner has a vested interest in facilitating the sale of the property and transfer of ownership to the purchaser, the original owners of an adjudicated property are often absent from, or at times hostile to, the sale. Whether due to abandonment, liens placed on the property, or failure to pay property taxes, the original property owner is not facilitating the tax sale. Therefore, state and federal laws require the tax collector of an adjudicated property to locate and notify all delinquent property owners and interested parties of the impending tax sale. These laws were put in place to allow delinquent property owners or interested parties the opportunity to maintain ownership, requiring only that they pay the back taxes or associated fines placed on the property. Should an adjudicated property tax collector knowingly fail to notify all identifiable delinquent property owners and interested parties of the tax sale, the purchaser’s stake in the purchased property can be challenged through a lawsuit filed by an unnotified interested party.
Do purchasers in other states face the same risks?
Purchasing adjudicated properties in other states is considerably less risky than in Louisiana. Through a combination of clear statutory notice requirements, rigorous recordation of tax title transfers, and the use of probate periods for unclear succession lines on properties, most states are able to mitigate risks associated with tax sales. Property purchasers in other states are provided with explicit directions on how to satisfy notice requirements. Due diligence is taken within county governments to track tax title transfers on most commercial and residential properties. In the case of deceased property owners who pass away without creating wills, judges are assigned to preside over property inheritance deliberations. While most states have taken these extra steps to boost the attractiveness of purchasing property through tax sales, Louisiana lags behind its peers. Our lack of a defined process for this issue shows itself in concentrations of blighted properties that accumulate quickly after natural disasters, or slowly in areas of high poverty.
What can be done to mitigate risks here in Louisiana?
BRAC is sponsoring legislation, HB 466 by Rep. Paula Davis, that would provide clear directions on how adjudicated property tax collectors can satisfy notice requirements. By adding to Louisiana’s statutory notice requirements practices observed in other states, BRAC seeks to remove some of the prohibitive risks towards purchasing and insuring these adjudicated properties. BRAC seeks to also make it easier to notify all interested parties, allowing them the ability to buy back their properties should they wish. Through a sensible retooling of state laws, Louisiana can find the right balance between protecting property rights of original, delinquent owners and new, investing purchasers.