Defending Homeownership

Defending Homeownership aetrahan Wed, 07/05/2023 - 14:48

Bill Cherbonnier, a Jesuit High School graduate, received his J.D. from Tulane University School of Law and was admitted to practice before the Louisiana Supreme Court in 1973.  He is a longtime member of the Louisiana Association for Justice, National Association of Consumer Bankruptcy Attorneys (Louisiana State Chair, 2006-2016), and the National Association of Consumer Advocates.  Bill was honored to receive the Distinguished Service Award on three separate occasions from the New Orleans Pro Bono Project and the 2017 Pro Bono Publico Award from the Louisiana State Bar Association. He aggressively and proudly defends individuals and small businesses in state court foreclosure, repossession, and collection lawsuits, and uses the federal bankruptcy laws when necessary to give the honest but unfortunate debtor a fresh start.

Jonah Freedman, Jonah Freedman Law, LLC, Loyola University New Orleans College of Law, J.D., 2014, Certified Financial Plannerä, 2004, Louisiana State University, B.S. in International Trade and Finance in 1998. Mr. Freedman began his career as a financial advisor for 13 years before becoming a fulltime attorney. His legal career started at the Loyola University Incubator Program, where he provided pro bono and low bono legal services to the underserved New Orleans community. Since 2016, Mr. Freedman has focused his practice on code-violation defense and tax-sale matters.

Material in this chapter is current as of June 27, 2023.

1 Introduction

1 Introduction aetrahan Wed, 07/05/2023 - 14:49

This chapter addresses various legal issues and practices involved in preventing the loss of homeownership. Home ownership is one of the most significant ways of building household and generational wealth, and, for low-income homeowners, their home is typically by far their most substantial asset. Therefore, an important aspect of representing such clients is preventing the loss of their homes.

According to the National Consumer Law Center:

Few events are more devastating to a family than the loss of a home to foreclosure. Children may be forced to change schools and leave friends. A family may be distanced from workplaces and social support. The homeowner’s equity is often lost as a result of a foreclosure sale, and it is not unusual for the foreclosed homeowner to find that they are personally liable for a large deficiency. Wages may be threatened to pay the deficiency judgment, further contributing to the family’s financial distress.1

This chapter addresses ways to prevent loss of a home when faced with two similar issues: foreclosure of a mortgage and seizure and sale of a home for delinquent tax payments.

  • 1Nat’l Consumer L. Ctr., Home Foreclosures § 5.1 (2d ed. 2023).

2 Foreclosure Basics

2 Foreclosure Basics aetrahan Wed, 07/05/2023 - 14:50

2.1 What Is Foreclosure?

2.1 What Is Foreclosure? aetrahan Wed, 07/05/2023 - 14:50

Foreclosure is the legal procedure employed by a creditor to seize property belonging to a debtor or guarantor and sell it at public auction in order to collect what is due the creditor on a defaulted promissory note.

Louisiana is a judicial foreclosure state. A creditor must go to court in order to foreclose a mortgage. Foreclosure is accomplished by either ordinary or executory process. Ordinary process is a proceeding against the individual debtor on the promissory note; executory process is a proceeding in rem against the collateral that has been mortgaged.

This chapter is about foreclosure defense and reversal; it does not address foreclosure prevention or avoidance. In almost all such situations, a potential client who is not yet a defendant in a state court foreclosure lawsuit should be referred to a HUD foreclosure counselor1  and should also be advised to strongly consider Chapter 13 bankruptcy.

  • 1Pre-foreclosure counselors may be located here. Foreclosure assistance and advice may also be obtained by calling 888-995-HOPE (4673). HUD counseling is free, although it should not be considered a substitute for active attorney involvement in the client’s case.

2.2 Challenges of Foreclosure Defense

2.2 Challenges of Foreclosure Defense aetrahan Wed, 07/05/2023 - 14:51

Foreclosure defense is a complicated area of law. Missing a deadline or a defense could cost an individual’s home. Defending a state-court foreclosure lawsuit is also a malpractice trap for the unwary attorney.

Before committing to representing a client who is a defendant in a state-court foreclosure lawsuit, you must be sure that you have the time, the expertise, and access to the clerical capacity necessary to meet all critical filing deadlines. Otherwise, you should decline the representation and refer the prospective client elsewhere.

Do not expect the foreclosing creditor to consent to any extensions of time or deadlines to file pleadings or bonds or to delay the date of the judicial sale. Do not expect the usual professional courtesies from opposing counsel, such as acceptance of service or waiving formal service of process by the sheriff. The mortgage servicer (i.e., the foreclosing creditor) runs every aspect of the foreclosure process; opposing counsel in a residential foreclosure is more likely than not just a scrivener with little or no independent authority to make concessions.

2.3 Reverse Mortgages

2.3 Reverse Mortgages aetrahan Wed, 07/05/2023 - 14:52

A Home Equity Conversion Mortgage (HECM), also known as a reverse mortgage, is a federally insured loan that enables homeowners who are 62 years of age or older to withdraw some of the equity in their home or use the loan proceeds to refinance or buy a new primary residence. Unlike a traditional mortgage, no repayment is required until the borrowers no longer use the home as their principal residence or fail to meet the mortgage obligations. Borrowers are responsible for property taxes, general upkeep of the property, and keeping all required insurance premiums current for the property. The regulations that govern the origination and servicing of an HECM are available at 24 C.F.R. § 206. Importantly, 24 C.F.R. § 206.27(c)(1) provides that the mortgage balance will be due and payable in full if a mortgagor dies and the property is not the principal residence of at least one surviving mortgagor or if a mortgagor conveys all of his or her title in the property and no other mortgagor retains title to the property.

3 Addressing Hard Deadlines

3 Addressing Hard Deadlines aetrahan Wed, 07/05/2023 - 14:52

3.1 Basic Principles

3.1 Basic Principles aetrahan Wed, 07/05/2023 - 14:53

When beginning a representation in a foreclosure case, review the pleadings, exhibits, and notices that were served on the client. Identify any hard deadlines that must be addressed immediately.

  • Be familiar with La. C.C.P. 5059 – Computation of time.
  • Be aware of La. R.S. 1:55 – Days of public rest, legal holidays, and half-holidays. Under this statute:

Only the enumerated holidays in Paragraph (1) of this Subsection, days of closure under Paragraph (2) of this Subsection, Mardi Gras only in those parishes in which the governing authority of the parish declares a holiday under authority of Paragraph (A)(3) of this Section, and all Saturdays and Sundays shall be considered as legal holidays for the purposes of Code of Civil Procedure Article 5059.

3.2 Ordinary Process

3.2 Ordinary Process aetrahan Wed, 07/05/2023 - 14:53

If the lawsuit is via ordinaria, determine

  • Whether service is proper and when responsive pleadings are due.
  • Whether the time for filing responsive pleadings as elapsed.
  • Whether a judgment has been signed.
  • Whether there is a pending motion for summary judgment.
  • Whether the deadlines for writs and/or an appeal have passed.
  • Whether a writ of fieri facias (fifa) has been issued.

3.3 Executive Process

3.3 Executive Process aetrahan Wed, 07/05/2023 - 14:54

If the lawsuit is via executiva, check the date that the order of seizure and sale was signed and the date the client was served with the notice of seizure. Confirm that the client was legally served; anything less than personal service should be scrutinized. Domiciliary service is frequently flawed.

If the order has been signed, determine whether the time for appeal has run. Devolutive appeal is not allowed. The suspensive appeal deadline is only 15 days after service of the La. C.C.P. art. 2721 notice of seizure.1

Determine the earliest date that the sale may be scheduled. This date must be at least 60 days from signing of order of seizure.2

Determine whether there is enough time to apply for a preliminary injunction to arrest the seizure and sale3  and have it served and heard. A temporary restraining order (TRO) is not available if immovable property is involved.4  Service of notice of hearing on the preliminary injunction is required. Remember that service notice of an application for a preliminary injunction on the foreclosing creditor might take days or weeks. A hearing on the preliminary injunction must, of course, be held prior to the sale. The hearing on the application must be held no earlier than two days after service and not later than 10 days after service of the notice of hearing.5

  • 1See La. C.C.P. art. 2642(B).
  • 2La. R.S. 13:3852(A).
  • 3See La. C.C.P. art. 2751, et seq.
  • 4La. C.C.P. art. 2752.
  • 5La. C.C.P. art. 3602, et seq.

3.4 Post-Sale

3.4 Post-Sale aetrahan Wed, 07/05/2023 - 14:56

Determine whether the property has already been sold by the sheriff. In some cases, the first time a homeowner finally realizes the significance of a foreclosure lawsuit is when the buyer at a sheriff sale knocks on the door and announces that the homeowner has to move out within a few days.

If the sale has already happened, determine whether the sheriff’s proces verbal has been filed in the conveyance records of the parish where the property is located. Although, under Louisiana law, the sheriff’s sale is complete “when the hammer falls,” the reality is that there may be one final opportunity to set aside the sale if the sheriff has not yet filed the proces verbal.

4 Analyzing the Case

4 Analyzing the Case aetrahan Wed, 07/05/2023 - 14:56

4.1 The Client’s Goals

4.1 The Client’s Goals aetrahan Wed, 07/05/2023 - 14:57

A client may have different goals that will affect your case strategy (or whether to take the case!)

The client wants to keep the house and pay for it. The client may want to live in it as the family home or to rent it for the income. The client may want to do this either by having the payment of arrearages be forgiven or postponed and the monthly note payments lowered or else by catching up on the arrearages and beginning to make the contractual payments again.

The client wants to keep the house but doesn’t want to pay for it. Such clients often make assertions about “sovereign citizens,” “dollar not backed by gold,” or some other unfounded legal theory that they read about on the Internet. Some clients are also under the mistaken impression that if the mortgage servicer cannot provide the original, signed promissory note that it cannot enforce the mortgage and that therefore no payments are due.

The client does not want to keep the house but wants to avoid further liability. Such liability might be the danger of a deficiency judgment, property tax liability, tort liability of an owner under the Louisiana Civil Code, or liability for condition of property under parish or city zoning laws and ordinances.

The client does not want to keep the house but needs time. The client might need time to move (e.g., to find another place to live, obtain money for a deposit on a new dwelling and moving expenses (“Cash for Keys”)), to sell and thereby recover equity and/or avoid a possible deficiency judgment, to find employment or a better job, to collect an inheritance, to settle a personal injury lawsuit, or to win the Powerball. The extent to which the goal relies on future expectations may require the lawyer to provide realistic advice.

4.2 The Cause of the Foreclosure

4.2 The Cause of the Foreclosure aetrahan Wed, 07/05/2023 - 14:57

Once you have determined the client’s goals, the next step in defending a foreclosure lawsuit is to learn why the debtor fell behind on the note and to determine whether the debtor is or will soon be able to catch up on the missed payments and maintain all future payments that come due. Possible causes of default include:

Financial Irresponsibility. The client has the income and cash flow to pay the monthly note under its original terms but has chosen to spend the money on something else. Such clients may be living beyond their means and be overextended or suffer from poor money management and failure to prioritize their debt.

Temporary Hard Times. Determine if the problems have resolved themselves such that the client can now make payment on the note under its original terms. Possible causes of temporary inability to keep up with mortgage payments include (1) business closure, loss of hours, unemployment; (2) illness or health issues, medical expenses; (3) divorce or separation, family issues; or (4) other personal problems.

Permanent Hard Times. It may be that the client’s situation will never get better and payment of the note under its original terms is impossible. Possible causes may include (1) permanent functional disability; (2) terminal illness or an incurable condition; (3) advanced age; (4) lack of education or marketable skills; (5) loss of spousal income, including Social Security or other government benefits; (6) loss of dependent income, such as child support; and (7) monthly payments that have become unaffordable because an adjusted-rate mortgage has adjusted higher or the rising costs of homeowners or flood insurance.

Addiction. A true addiction must almost always be resolved or else satisfying the addiction will always come before saving the house. Addictions may be to substances (e.g., alcohol, drugs) or experiences (e.g., gambling, shopping).

4.3 The Client’s Financial Condition

4.3 The Client’s Financial Condition aetrahan Wed, 07/05/2023 - 14:58

When evaluating a case, you must determine the client’s current and projected financial condition. Good practice demands that the attorney require the client to fill out, in the client’s own handwriting, a complete and accurate listing of assets and debts and a complete and accurate listing of income and expenses. Many clients have no idea how much they’re actually spending.

Determine whether the client will be able to keep up with all future monthly payments due under the mortgage as well as homeowners and flood insurance payments and taxes. If not, defending the foreclosure suit may not genuinely be in the client’s best interest. You should also consider whether the client is capable of meeting the other responsibilities of homeownership including maintenance, repairs, eventual replacement of roof, heating, air conditioning, plumbing, painting, etc.

4.4 The Court Record

4.4 The Court Record aetrahan Wed, 07/05/2023 - 14:59

The only essential documents that must be reviewed at initial intake are those contained in the actual court record. Whether the foreclosure lawsuit is filed by ordinary or executory process, the court record should contain the original or certified copies of the note, the mortgage, all assignments, and sheriff’s returns showing personal or domiciliary service of the pleadings on the parties.

In a foreclosure suit filed utilizing executory process, there is no citation. Only the notice of seizure must be served on a defendant, and if the sale is being made with appraisal, the notice to appoint appraiser must also be served. The original petition with exhibits is not required to be served on the defendant, and it must be reviewed on the court’s website or at the courthouse.

4.5 Assessing Likelihood of Victory

4.5 Assessing Likelihood of Victory aetrahan Wed, 07/05/2023 - 14:59

When determining whether to litigate, ask whether there are any defenses apparent on the face of the record.

  • Does the court have jurisdiction and is venue proper? This is not a problem if the lawsuit is brought in the state judicial district court in the parish where the property is located.
  • If the lawsuit is brought using executory process, is there an act importing a confession of judgment and is the necessary authentic evidence submitted with the petition in accordance with the La . C.C.P. art. 2635?

Also consider whether the homeowner has a genuine defense that will result in a dismissal of the lawsuit with prejudice. Examples include (1) extinguishment by payment or prescription of the debt secured by the mortgage; (2) prematurity or an attempt to enforce a debt not yet due; (3) a forged instrument or signature, obtained through, fraud, violence, or other unlawful means; and (4) compensation/offset of a liquidated claim against the seizing creditor.

5 Federal Law Strategies

5 Federal Law Strategies aetrahan Thu, 07/06/2023 - 13:23

5.1 Bankruptcy

5.1 Bankruptcy aetrahan Thu, 07/06/2023 - 13:23

Competent representation of a defendant involved in a state-court foreclosure lawsuit requires a review and analysis of the options available under Title 11 of the United States Code (i.e., the Bankruptcy Code), specifically chapters 7, 11, 12, or 13.

Generally, the filing of a petition for relief in bankruptcy court creates an “automatic stay” pursuant to 11 U.S.C. § 362. This automatic stay temporarily halts further proceedings in the state foreclosure case without the necessity of posting security and makes a preliminary injunction to arrest the seizure and sale of the debtor’s home unnecessary. If the homeowner filed another bankruptcy in the recent past, the automatic stay may not apply or may only apply for a very limited period. In addition, a homeowner who has been found to have abused the bankruptcy process in the past may be prohibited from filing another bankruptcy for as long as 5 years. The attorney should always run the client’s name through the federal PACER or CM/ECF system to determine whether a foreclosure client has ever filed bankruptcy in the past. Do not simply rely on the client’s statements.

All creditors, including the foreclosing creditor, must file a proof of claim within 70 days of the date of the initial Chapter 13 bankruptcy filing. When a debtor’s home is involved in foreclosure proceedings, the creditor’s proof of claim must account for every charge incurred and every payment made by the debtor going back to the last time the debtor was current on the mortgage. This proof of claim contains much information that the debtor could only have obtained by lengthy discovery in state court.

The bankruptcy debtor is given the opportunity to object to the foreclosing creditor’s proof of claim, and a federal bankruptcy judge will decide to the penny the amount of mortgage arrearages. The bankruptcy debtor can also raise any defense to the foreclosure that the debtor might have had in state court. Under Chapter 13, the mortgage debtor can propose a plan to pay the back-due mortgage payments over a period of up to five years, frequently with little or no interest.

Chapter 13 allows a debtor to modify other secured debts, such as a motor vehicle loan, to lower the monthly payments due on those debts, thereby freeing up funds that the debtor can use to save the home. Chapter 13 may allow a debtor to pay little or nothing on unsecured debt, such as credit cards, payday loans, and bank and credit union loans; eliminating or significantly reducing unsecured debt can also make more cash available to save the home.

To qualify for a Chapter 13 bankruptcy, a client must have “sufficient regular income.” This income may be wages, government benefits, or financial help from family. The client must also have filed all required federal tax returns for the past four years.

A debtor is usually required to make the payments due under a confirmed Chapter 13 plan to the trustee by automatic deduction from the debtor’s checking account. If necessary, the court will order the debtor’s employer pay the trustee directly. In many cases, this financial discipline is necessary and ensures the likelihood of successful completion of the debtor’s plan. While a debtor is making payment under a Chapter 13 plan, the debtor must give up any credit cards and is not allowed to incur any new debt on credit (with the exception of emergency medical and other expenses) without prior approval of the bankruptcy court.

Although bankruptcy is frequently considered a “nuclear option” for a client confronted with substantial debt and potentially facing foreclosure, the benefits of filing a Chapter 13 generally outweigh any disadvantage. Chapter 13 does not prohibit the debtor from applying for any loan modifications that the client would otherwise be otherwise eligible for. If the client wants to sell the home, the bankruptcy court will usually give the client 6 to 12 months to do so if listing with an established commercial real estate brokerage firm. Chapter 13 stops wage garnishments and other collection activities and prohibits a creditor from filing collection suits and foreclosure actions as long as the plan is pending. Under Chapter 13, a debtor can provide for the payment of unpaid federal and state taxes over a period of up to five years. However, the IRS will cancel any open installment agreement or offer in compromise if the debtor files for relief under any bankruptcy chapter. The debtor can defer payment of student loans until the end of the plan. Although this can create a substantial arrearage later, it frees up additional funds that the debtor can use to save the home.

Nevertheless, there are some disadvantages to Chapter 13 that may be insurmountable for some debtors. Bankruptcy under any chapter negatively affects an individual’s credit. However, any damage will likely be minimal in view of the damage already done by the filing of the foreclosure suit. A Chapter 13 debtor is required to live on a strict budget that does not allow for the payment of private or parochial school tuition or college tuition for child over 18 years of age. Chapter 13 does not allow special treatment for cosigned debts. However, creditors are prevented from suing a cosigner if the cosigned debt is paid in full under the plan. If a cosigned debt is only partially paid in the plan, the creditor may sue a cosigner for the unpaid amount of the debt. In practical terms, this means is that a debtor who modifies a cosigned loan will subject his guarantors (usually a close relative, fellow employee, or friend) to a lawsuit.

5.2 Other Federal Law

5.2 Other Federal Law aetrahan Thu, 07/06/2023 - 13:25

5.2.1 General Principles

5.2.1 General Principles aetrahan Thu, 07/06/2023 - 13:26

If the foreclosed mortgage is guaranteed by a federal agency or a Government Sponsored Entity (GSE), requirements in addition to those provided by Louisiana law will govern the state court foreclosure action. Although by the time a mortgage is foreclosed in state court, most clients have either failed to take advantage of programs available to them, or they will have applied for modification and been denied, the following sections will discuss some aspect of those programs in the following sections.

5.2.2 FHA-Insured Home Loans

5.2.2 FHA-Insured Home Loans aetrahan Thu, 07/06/2023 - 13:27

The purpose of the Federal Housing Administration (FHA) within the Department of Housing and Urban Development is to expand homeownership opportunities for people who are not adequately served by the private market.

FHA does not lend money; private lenders finance the home purchase loan, and the FHA guarantees the lender that it will be made whole in the event of a mortgage default.

Mortgage servicers of FHA loans must comply with the FHA loan servicing guidelines.1  These guidelines formerly provided six different options for homeowners who were threatened with foreclosure: forbearance, refinancing, loan modification, partial claim, pre-foreclosure sale, and deed in lieu of foreclosure. However, the COVID-19 era resulted in the suspension of some of these programs and the creation of others. Any client with an FHA loan should be referred to a HUD counselor for the latest information.

Mortgage servicers must review an FHA loan for these loss mitigation options before proceeding to foreclosure.2

HUD-guaranteed loans must be at least 3 months past due before foreclosure. Additionally, all Consumer Financial Protection Bureau rules and regulations must be complied with. HUD may pursue a deficiency judgment but currently (as of May 2023) does not do so as a matter of policy and politics.

5.2.3 VA Loans

5.2.3 VA Loans aetrahan Thu, 07/06/2023 - 13:30

The Department of Veterans Affairs (VA) guarantees loans made by lenders to veterans. Mortgage servicers of VA loans must comply with special servicing guidelines.1  A mortgage company’s failure to comply with the VA Loan Servicing Guidelines may be a complete defense to a mortgage foreclosure action.

  • 138 C.F.R. §§ 36.4275–.4283.

5.2.4 USDA Loans or Rural Housing Service

5.2.4 USDA Loans or Rural Housing Service aetrahan Thu, 07/06/2023 - 13:30

The United States Department of Agriculture (USDA) operates the Rural Housing Service, which provides single-family Direct and Guaranteed Loans under its directive to improve the economy and quality of life in rural America.

USDA is the lender and servicer for Direct Loans. Special servicing for Direct Loans include workout agreements, protective advances in which USDA pays taxes and insurance on behalf of borrower.

USDA Guaranteed Loans are guaranteed by the USDA against default by the borrower. USDA Guaranteed Loans will not be serviced by the USDA and will not necessarily be identifiable from the loan documents. Special loss mitigation options are available to borrowers with USDA Guaranteed Loans.1

5.2.5 Consumer Financial Protection Bureau

5.2.5 Consumer Financial Protection Bureau aetrahan Thu, 07/06/2023 - 13:32

The Consumer Financial Protection Bureau (CFPB) also imposes requirements on private mortgage lenders and servicers which, if not complied with, may be a defense to the state court foreclosure action.

6 Foreclosure Procedure

6 Foreclosure Procedure aetrahan Thu, 07/06/2023 - 13:32

6.1 Executory Process

6.1 Executory Process aetrahan Thu, 07/06/2023 - 13:32

In Louisiana, most foreclosure cases are brought by executory process as provided by La. C.C.P. arts. 2631–2772. After the petition for executory process is filed, a judgment of seizure and sale is granted, ordering the sheriff to seize and sell the property.1  Citation is unnecessary in executory proceedings, but the sheriff must attempt serve the defendant homeowner with a written notice of seizure.2  If the sheriff is unable to serve a defendant, La. C.C.P. arts. 2641 and 2674 apply.

A debtor must assert defenses to a petition for executory process by injunction or suspensive appeal.3  A suspensive appeal is not practical because a bond equal to 150% of the balance due on the debt must be posted.4  A preliminary injunction (but not a temporary restraining order) may issue to arrest the seizure and sale of immovable property.5  Therefore, a homeowner must move quickly to enjoin the sale. The preliminary injunction must be heard not less than 2 days nor more than 10 days after service of the rule to show cause why the preliminary injunction should not issue.6

A foreclosure by executory process may be halted by injunction if the debt is extinguished or legally unenforceable or if the procedures required for executory process have not been followed.7  Although security is still required in an amount to be set by the court,8  La. C.C.P. art. 2753 lists specific circumstances in which security is not required, including when the injunction is sought on grounds of prescription, forgery, or lack of authentic evidence.

To obtain a preliminary injunction, an applicant must make out a prima facie case and show irreparable injury.9  Real property is unique, and the loss of one’s home meets the irreparable injury standard. If a preliminary injunction is denied, a suspensive appeal of the injunction denial does not halt foreclosure by executory process.10

The sale may be enjoined “if the procedure required by law for an executory proceeding has not been followed.”11  Thus, defects in authentic evidence may bar executory process. Under Louisiana law, the mortgage follows the note.12  In addition, the foreclosing creditor must establish the chain of title of the note and mortgage at issue through authentic evidence. An unendorsed promissory note is not prima facie evidence of ownership.13

  • 1La. C.C.P. art. 2635.
  • 2La. C.C.P. arts. 2640, 2721.
  • 3La. C.C.P. art. 2642; see First Guar. Bank, Hammond, La. v. Baton Rouge Petroleum Ctr., 529 So. 2d 834 (La. 1987); Provident Bank v. Leslie, 2008-CA-1449 (La. App. 4 Cir. 3/10/10), 28 So. 3d 1196.
  • 4La. C.C.P. art. 2642.
  • 5La. C.C.P. art. 2752.
  • 6La. C.C.P. art. 3602.
  • 7La. C.C.P. art. 2751.
  • 8La. C.C.P. art. 2754.
  • 9Jo Ellen Smith Psychiatric Hosp. v. Harrell, 546 So. 2d 886, 891 (La. App. 1 Cir. 1989).
  • 10Wood v. Fontenot, 2004-1174 (La. App. 3 Cir. 3/2/05), 896 So. 2d 323; United Cos. Lending Corp. v. Hall, 97-2525 (La. App. 1 Cir. 11/6/98), 722 So. 2d 48.
  • 11La. C.C.P. art. 2751.
  • 12La. C.C. art. 3312; La. Nat’l Bank of Baton Rouge v. Heroman, 280 So. 2d 362 (La. App. 3 Cir. 1973).
  • 13Bankers Tr. Co. of Cal., N.A. v. Cooley, 2003-1942 (La. App. 1 Cir. 6/25/04), 884 So. 2d 594; Hollis v. Norton, 586 So. 2d 656 (La. App. 5 Cir. 1991); N.E. England Associates, Inc. v. Davis, 333 So. 2d 696 (La. App. 4 Cir. 1976).

6.2 Ordinary process

6.2 Ordinary process aetrahan Thu, 07/06/2023 - 13:38

If the note is lost, the creditor lacks authentic evidence, or the mortgage has been rescinded, the foreclosure can only be sought in an ordinary proceeding.1  The creditor also has the right to convert an executory proceeding to an ordinary proceeding. In an ordinary proceeding, a debtor may assert defenses, offsets, and reconventional demands.

In a foreclosure by ordinary process, the original promissory note does not have to be introduced into evidence if the requirements of the Lost Note Statute are met. This statute requires that the loss of the note be advertised in a public newspaper and proper means taken to recover possession of the instrument.2

  • 1La. C.C.P. art. 2644.
  • 2La. R.S. 13:3741; see U.S. Bank Nat’l Ass’n v. Custer, 09-802 (La. App. 5 Cir. 2/9/10), 33 So. 3d 303; Norwest Bank v. Walker, 2005-1068, p. 4 (La. App. 4 Cir. 5/24/06), 933 So. 2d 222, 225.

7 After a Foreclosure Sale

7 After a Foreclosure Sale aetrahan Thu, 07/06/2023 - 13:39

7.1 Annulment

7.1 Annulment aetrahan Thu, 07/06/2023 - 13:39

After the sheriff has filed the process verbal or filed the sale for recordation in the parish conveyance records, the homeowner is precluded from asserting objections to the form or procedure of the sale or the lack of authentic evidence to support the seizure and sale.1

However, under state law, there may be other grounds to attack the sale as a nullity if the foreclosing creditor is the adjudicatee at the sale or still owns the property. For example, a sale may be annulled if:

  • The sale price that was for less than two-thirds of the appraised value (if the home was appraised).2
  • The sale took place without a prior seizure of the property.3
  • The sale was judicial and took place without due process notice to a co-owner.4
  • The sale was accomplished through fraud or ill practices.5
  • The sale was conducted in violation of a bankruptcy stay order.
  • 1La. R.S. 13:4112; cf. Avery v. CitiMortgage, Inc., 2008-2052 (La. App. 1 Cir. 5/13/09), 15 So. 3d 240 (holding that res judicata bars suit for nullity when debtor did not enjoin or appeal executory process).
  • 2La. C.C.P. art. 2336.
  • 3Turner v. Glass, 188 So. 147 (La. 1939).
  • 4Magee v. Amiss, 502 So. 2d 568 (La. 1987).
  • 5La. C.C.P. arts. 2001–2004; Ellerd v. Williams, 404 So. 2d 1271, 1273 (La. App. 2 Cir. 1981); Slidell Bldg. Supply, Inc. v. I.D.S. Mortg. Corp., 273 So. 2d 343 (La. App. 1 Cir. 1972).

7.2 Unencumbered Interests

7.2 Unencumbered Interests aetrahan Thu, 07/06/2023 - 13:42

If there is money left over after all creditors have been paid, the homeowner may seek return of those funds from the sheriff. At other times, another party may have a co-ownership interest in the property (or even a homestead exemption claim) that may not be subject to the mortgage. In these cases, the co-owner should take immediate action to protect the interest in the funds from a foreclosure sale.1

  • 1See, e.g., Am. Thrift & Fin. Plan, Inc. v. Valteau, 576 So. 2d 598 (La. App. 4 Cir. 1991).

7.3 Tax Consequences

7.3 Tax Consequences aetrahan Thu, 07/06/2023 - 13:43

A foreclosure sale, short sale, or cancellation of debt in a loan modification may have income tax consequences.1

  • 1For additional discussion of this point, see Section 12 of this manual’s chapter on tax law.

7.4 Deficiency Judgments

7.4 Deficiency Judgments aetrahan Thu, 07/06/2023 - 13:43

A deficiency judgment is “a personal judgment against the debtor for any deficiency remaining after the application of the net proceeds of [the foreclosure] sale to the [mortgage].”1  If the property was sold in executory process without appraisal, no deficiency judgment can be had.2  Untimely appraisals will also deprive the creditor of the right to a deficiency judgment. A debtor cannot waive the statutory prohibition against deficiency judgments when the real estate was sold without appraisal.3

  • 1Citizens Sav. & Loan Ass’n v. Kinchen, 622 So. 2d 662, 664 (La. 1993).
  • 2La. R.S. 13:4106; Williams v. Perkins‑Seigne Partner, 633 So. 2d 1247, 1249 (La. 1994), on reh’g, 93-2131 (La. 1/27/95), 649 So. 2d 367.
  • 3La. R.S. 13:4107.

8 Louisiana Real Estate Taxes

8 Louisiana Real Estate Taxes aetrahan Thu, 07/06/2023 - 13:45

8.1 Introduction

8.1 Introduction aetrahan Thu, 07/06/2023 - 13:45

8.1.1 Screening Homeowners

8.1.1 Screening Homeowners aetrahan Thu, 07/06/2023 - 13:45

You can help preserve home ownership for low-income clients by a simple check-up of their real estate. Check for the following:

  • Is the homeowner listed as the homeowner in the assessor and conveyance records?
  • Is the homeowner’s address in the assessor’s records correct?
  • Has there been a tax sale, blight adjudication or other adverse government action?
  • Is the homeowner getting the correct homestead exemption?
  • Is the homeowner the surviving spouse of an active-duty service member?1
  • Is the homeowner a 100% disabled veteran due to a service-connected injury or the surviving spouse of such a person?2
  • Is the homeowner eligible for an age freeze for being 65 or older?
  • Is the homeowner permanently totally disabled as determined by a court order?

If the owner’s name and correct address are not listed with the assessor, the owner won’t get notices of tax sales, code enforcement, and other adverse government actions. If the assessor’s records list another person as the owner, there may have been a tax sale.

  • 1See La. Const. art. VII, § 21(M).
  • 2The ad valorem tax exemption for disabled veterans under La. Const. art. VII, § 21(K) is distinct from the homestead exemption established by La. Const. art. VII, § 20 and offers a benefit in addition to a homestead exemption. The exemptions under La. Const. art. VII, § 21(K) and La. Const. art. VII, § 20(A)(3) may be cumulated under certain circumstances, but a tax assessor must conduct a fact-specific inquiry when both exemptions are claimed. La. Att’y Gen. Op. No. 16-0206 (June 22, 2017).

8.1.2 Homestead Exemption

8.1.2 Homestead Exemption aetrahan Thu, 07/06/2023 - 13:46

A Louisiana taxpayer is entitled to a $75,000 homestead exemption from ad valorem taxes on the taxpayer’s primary home (provided that the taxpayer lives in that home). For co-owned homesteads, the owners who occupy the homestead are entitled to a homestead exemption prorated for their ownership.

Homeowners should timely apply for the homestead exemption each year. If a homeowner has forgotten to file the homestead exemption application, the assessors will generally process retroactive homestead exemptions for the last 3 years.1  A homestead exemption may be granted to an heir without the opening of a judicial succession.2  However, if there is a will, an assessor may decline to grant a homestead exemption.

  • 1If taxes were erroneously paid on exempt property, the taxpayer’s refund claims must be made within 3 years. LaNasa v. City of New Orleans, 99-CA-2989 (La. App. 4 Cir. 8/27/03), 855 So.2d 404; La. Att’y Gen. Op. 07-0228 (Sept. 4, 2007); La. Att’y Gen. Op. 04-0221 (Sept. 23, 2004).
  • 2La. Atty. Gen. Op. 91-262 (Aug. 2, 1991) (opining that an affidavit of heirship may suffice as proof of ownership).

8.1.3 Partial Tax Payments

8.1.3 Partial Tax Payments aetrahan Thu, 07/06/2023 - 13:48

Some parishes may allow partial payment of ad valorem taxes. However, a partial payment of delinquent taxes will not stop the tax collector from selling the property at tax sale for the remaining amounts due.

8.2 Tax Sales

8.2 Tax Sales aetrahan Thu, 07/06/2023 - 13:48

8.2.1 Basic Principles

8.2.1 Basic Principles aetrahan Thu, 07/06/2023 - 13:48

Ad valorem taxes are real obligations or in rem obligations on the land itself,1 which means that a client cannot not be sued personally for delinquent real estate taxes. Rather, a lien on the property is sold at a tax sale subject to a right of redemption. If no person bids on the property at tax sale, the tax lien will be adjudicated to the taxing authority.

Tax sales in Louisiana are authorized by Section 25 of Article VII of the Louisiana Constitution. In 2008, the Louisiana Legislature comprehensively amended and restated the law governing the payment and collection of property taxes, tax sales, and redemptions.2  Under the reforms, tax sales switched from a “tax sale deed” to a “tax sale title.”3  The tax sale title is sold as a tax sale certificate, which is redeemable for three years (or eighteen months if the property is blighted) from the date of tax sale certificate recordation. Redemption is made by making a combined payment of a 5% penalty plus a simple interest rate of 1% per month.

  • 1La. C.C. art. 1763; see Eagle Pipe & Supply, Inc. v. Amerada Hess Corp., 2010-2267 (La. 10/25/11), 79 So. 3d 246; Ducote v. City of New Orleans, 176 So. 2d 198, 201 (La. App. 4. Cir. 1965).
  • 2See La. R.S. 47:2121, et seq. These amendments became effective January 1, 2009.
  • 3La. R.S. 47:2121(A)(1).

8.2.2 Transfer of Ownership

8.2.2 Transfer of Ownership aetrahan Thu, 07/06/2023 - 13:50

If the tax sale certificate is not redeemed, it “transfers to its holder ownership of the tax sale property, free of the ownership and other interests, claims, or encumbrances held by all duly notified persons.”1  Importantly, a tax sale certificate only converts to ownership once both the redemption period has expired and the interested parties are duly notified. The expiration of the redemption period does not automatically mean that the tax sale purchaser owns the property.2  The key in any tax sale defense is to determine that your client was not “duly notified.”

A party can be “duly notified” by anyone, i.e., the tax collector or the tax sale purchaser, either before or after the tax sale occurred. The tax sale party can be duly notified even without actual receipt of notice.3  If a tax sale party is “duly notified” after the expiration of the redemptive period, a tax title will convert to ownership 6 months after the tax sale party is duly notified.4  To prevent the tax sale purchaser from becoming the owner, the debtor must file a nullity action within that 6-month prescriptive period.5

  • 1La. R.S. 47:2121(C)(1).
  • 2See La. R.S. 47:2121(B) (providing that a tax sale has no effect on non-duly-notified interested parties).
  • 3La. R.S. 47:2122(4).
  • 4See generally Cent. Props. v. Fairway Gardenhomes, LLC, 2016-1855 (La. 6/27/17), 225 So. 3d 441.
  • 5La. Const. art. VII, § 25(C) (“Annulment. No sale of property for taxes shall be set aside for any cause, except on proof of payment of the taxes prior to the date of the sale, unless the proceeding to annul is instituted within six months after service of notice of sale.”).

8.2.3 Quieting Title

8.2.3 Quieting Title aetrahan Thu, 07/06/2023 - 13:55

After the redemption period expires, the holder of the tax sale certificate may bring an action to quiet title. A tax title can be quieted under any manner provided by law.1  Several statutes provide protocols for a tax sale purchaser to quiet title and cancel interests: La. R.S. 47:2266 (Quiet Title action), La. R.S. 47:2271, et seq. (Monition action), and La. R.S. 47:2157 (Affidavit procedure). Under each procedure, the 6-month prescriptive period begins on a different date.

A Quiet Title action is a lawsuit filed under ordinary procedure, whereby the tax sale party’s right to file a nullity action prescribes 6 months after the date of service.2

A Monition action for tax sales is a lawsuit filed in district court, but reflects more of a summary or executory proceeding in nature. There are no defendants, and no service is required. Tax sale monitions mirror monitions for judicial sales under La. R.S. 13:4941, except that in tax sale monitions the tax sale purchaser must mail notices to the tax sale parties and present an affidavit of noticing efforts in court.3  For tax sale monitions, the 6-month prescriptive period to bring a nullity action commences on the date of first advertisement.4

Quieting Title by Affidavit under La. R.S. 47:2157 is similar to the affidavit required in the monition proceeding, except that the 6-month prescriptive period to file a nullity action commences on the date the notice was mailed, not the date of publication. Quieting Title by Affidavit does not require a judicial confirmation of title. Under this statute, the recorder of mortgages and conveyances is directed to cancel the interests of all named parties named in the affidavit recorded by the tax sale purchaser.

  • 1La. Const. art. VII, § 25(D).
  • 2La. R.S. 47:2266(A)(1).
  • 3La. R.S. 47:2277.
  • 4La. R.S. 47:2275.

8.3 Redemptions

8.3 Redemptions aetrahan Thu, 07/06/2023 - 13:56

8.3.1 Right of Redemption

8.3.1 Right of Redemption aetrahan Thu, 07/06/2023 - 13:56

Tax debtors have a constitutional right to redeem property sold at a tax sale by paying the delinquent taxes, accrued taxes, interest, and penalties within the time for redemption.1  “Once the property owner timely redeems his property, the rights of the tax sale purchaser to the ownership or possession of the property are dissolved.”2  Louisiana law favors redemption of property sold at tax sales.3

  • 1The redemptive period is 3 years (or 18 months if the property is blighted). La. Const. art. VII, § 25(B).
  • 2Smith v. Brumfield, 2013-1171, p. 16 (La. App. 4 Cir. 1/15/14), 133 So. 3d 70, 79.
  • 3Fleckinger v. Smith, 319 So. 2d 881, 885 (La. App. 4 Cir. 1975); ACORN Cmty. Land Ass’n of La. v. Zeno, 2005-CA-1489 (La. App. 4 Cir. 6/21/06), 936 So. 2d 836.

8.3.2 Time for Redemption

8.3.2 Time for Redemption aetrahan Thu, 07/06/2023 - 13:58

In general, property may be redeemed within 3 years of the recordation of the tax deed in the conveyance records.1  A “tax sale certificate” is considered a “tax deed” for redemption purposes. Always check the recordation date to determine how much time is left for redemption. In some parishes, many months can pass between the tax sale and the recordation of the tax sale certificate.

While a tax sale redemptive period is peremptive,2  in some cases an untimely redemption may relate back to a timely redemption request or similar action if the tax collector was unable to timely process that request.3  Computer issues, hurricane closures, and emergency COVID-19 closures are the most common reasons for a tax collector’s inability to process tax sale redemptions. If your client has attempted to redeem a tax sale, but the tax collector was unable to complete the request for any reason, your client must preserve all communications and take detailed notes of each unfulfilled redemption request. For an unfulfilled redemption request to be deemed timely, the client must continuously make redemption requests until the tax collector is able to comply.

In addition, the Governor has the power to “suspend the provisions of any regulatory statute . . . if strict compliance with the provisions of any statute . . . would in any way prevent, hinder, or delay necessary action in coping with the emergency.”4  Suspension of tax sale redemptive periods has occurred numerous times under the Governor’s emergency powers following hurricanes and during the COVID-19 pandemic. In some instances, the Legislature has codified the suspension of the tax sale period, as it did after the COVID-19 “stay at home” orders.5

  • 1La. Const. art. VII, § 25(B)(1); see Hamilton v. Royal Int’l Petroleum Corp., 2005-C-846 (La. 2/22/06), 934 So. 2d 25.
  • 2La. R.S. 47:2241.
  • 3Harris v. Guardian Funds, Inc., 425 So. 2d 1322 (La. App. 4 Cir. 1983) (lawsuit to redeem filed within 3 years); Becnel v. Woodland, 628 So. 2d 89, 91 (La. App. 5 Cir. 1993) (oral request to redeem within 3 years is sufficient); Miss. Land Co. v. S & A Props. II, Inc., pp. 5–7 (La. App. 3 Cir. 5/8/02), 817 So. 2d 1200, 1204–05 (erroneous payment within 3-year redemption period held sufficient effort to redeem); S.A. Mortgage Serv., Co. v. Lemoine, 01-CV-250 (La. App. 5 Cir. 10/17/01), 800 So. 2d 1015 (redemption timely where insufficient amount paid because city gave tax debtor the wrong redemption amount); Succession of Caldarera v. Zeno, 2009-1397, pp. 6–8 (La. App. 4 Cir. 7/16/10), 43 So. 3d 1080, 1085–86 (succession’s timely attempts to redeem were delays by erroneous city records).
  • 4La. R.S. 29:724(1).
  • 5See La. R.S. 9:5828, et seq.

8.3.3 Blighted Property

8.3.3 Blighted Property aetrahan Thu, 07/06/2023 - 14:02

A shorter 18-month redemptive period exists for blighted or abandoned property sold at a tax sale.1  In Padilla v. Schwartz, the Fourth Circuit Court of Appeal held that this 18-month period only applies when the tax sale occurred under the statutory authority for sales of blighted property.2  However, the tax sale in Padilla occurred prior to the tax sale revisions, and so its holding can no longer be relied on as a tax sale defense. In Smith v. Brumfield, the same court distinguished Padilla by holding that in order for the 18-month redemptive period to apply, the property need only have been judicially declared blighted or abandoned prior to the tax sale.3  However, in In re Flag Boy Properties, LLC, Praying for Monition, the Fourth Circuit held that a code violation judgment rendered subsequent to a judgment of blight that does not declare the property blighted for a second time is “sufficient proof of compliance” that the property is no blighted and, therefore, not subject to an 18-month redemptive period.4

  • 1La. Const. art. VII, § 25(B)(2).
  • 2Padilla v. Schwartz, 2006-CA-1517 (La. App. 4 Cir. 3/11/09), 11 So. 3d 6.
  • 3Smith v. Brumfield, 2013-1171 (La. App. 4 Cir. 1/15/14), 133 So. 3d 70.
  • 4In re Flag Boy Properties, LLC, 2021-0644 (La. App. 4 Cir. 3/10/22).

8.3.4 Adjudicated Sales

8.3.4 Adjudicated Sales aetrahan Thu, 07/06/2023 - 14:04

If a third-party does not buy the property at the tax sale, it is adjudicated to the city or parish. In “adjudicated sales”, the property may be redeemed beyond the 3-year period until any of the following occurs:

  • The later of 60 days or 6 months, as applicable, after the notice required by R.S. 47:2206 [notice of potential sale or donation] or the filing of the sale or donation transferring the property from the political division pursuant to R.S. 47:2201, et seq.
  • The granting of the order of possession pursuant to R.S. 47:2232 [suit by political subdivision to obtain possession of adjudicated property].
  • 60 days or 6 months as applicable after the notice required by R.S. 47:2236 [declaration of political subdivision by ordinance of its intent to acquire property].1

Some taxing authorities allow for redemption of an adjudication lien until the day the act transferring the property to a third party is filed. As a result, there may not be a real need to litigate a defense to an adjudicated lien as its redemption period extends well beyond the three years. A tax debtor’s best defense is to simply redeem the adjudicated tax sale.

  • 1La. R.S. 47:2246(A).

8.3.5 Procedure for Redemption

8.3.5 Procedure for Redemption aetrahan Thu, 07/06/2023 - 14:05

Any person may redeem a tax sale through the tax collector. However, the redemption is in the name of the tax debtor and for the debtor’s benefit.1  The basic redemption price is the delinquent tax, accrued taxes since the tax sale, a 5% penalty, costs, and simple interest at 1% per month. Upon payment of the redemption costs, the tax collector must issue a redemption certificate to the name of the tax debtor and file it in the appropriate conveyance records.2

Governmental liens can also be added to the tax sale redemption price. La. R.S. 13:2575(C)(2) mandates that “[a]ny liens placed against such immovable property shall be included in the next annual ad valorem tax bill and shall be paid along with such taxes . . . .” However, La. R.S. 47:2244, apparently allows the tax collector to require the payment of all amounts accrued under other government liens at the time of the redemption payment, not just those placed on the tax bill. Whether a tax collector can require payment of governmental liens that have not been included on the tax bill has not yet been tested in the courts.

Tax sale purchasers are required to pay the taxes for subsequent tax years.3  If the tax sale purchaser fails to pay, the property can be sold again at tax sale. However, a tax sale purchaser has a right to redeem the subsequent tax sale within 3 years of that sale.4  The interest of a tax sale purchaser who chooses not to redeem following a subsequent tax sale can be terminated just as an original tax debtor’s interest would.5  However, until a subsequent tax sale’s redemption period has passed, a tax sale purchaser’s failure to pay subsequent taxes does not affect the purchaser’s ability to quiet the purchaser’s own tax title.

  • 1La. R.S. 47:2242.
  • 2La. R.S. 47:2245.
  • 3La. R.S. 47:2161.
  • 4Virtocom Fin. v. Palo Verde, 03-CA-621 (La. App. 5 Cir. 2/23/04), 869 So.2d 194.
  • 5See La. R.S. 47:2122(19) (providing that a prior tax sale purchaser is a “tax sale party” whose interest may be cancelled).

8.4 Annulment

8.4 Annulment aetrahan Thu, 07/06/2023 - 14:08

8.4.1 Introduction

8.4.1 Introduction aetrahan Thu, 07/06/2023 - 14:09

If the redemption period has expired, aside from negotiating a redemption payoff directly with the tax sale purchaser, a tax debtor’s best remedy is to file a lawsuit to annul the tax sale. A template for a petition to annul a tax sale is located in Section 9 of this chapter.

8.4.2 Right of Action

8.4.2 Right of Action aetrahan Thu, 07/06/2023 - 14:09

To be successful, claimants must first establish they are a “tax sale party”, which means that they had a recorded interest in the mortgage or conveyance records entitled them to tax sale notice.1  This requirement mainly affects heirs or legatees, who often have no recorded interest. However, while heirs or legatees may not bring a nullity action in their own right, an heir to an unopened succession can assert a nullity action based on the claims of the decedent.2

  • 1La. R.S. 47:2122(19) (“‘Tax sale party’ means the tax notice party, the owner of property, including the owner of record at the time of a tax sale, as shown in the conveyance records of the appropriate parish, and any other person holding an interest, such as a mortgage, privilege, or other encumbrance on the property, including a tax sale purchaser, as shown in the mortgage and conveyance records of the appropriate parish.”).
  • 2Woodard v. Upp, 2013-0999, pp. 5–7 (La. App. 1 Cir. 2/18/14), 142 So. 3d 14, 18–19.

8.4.3 Grounds for Annulment

8.4.3 Grounds for Annulment aetrahan Thu, 07/06/2023 - 14:10

With the 2008 revisions, the Legislature eliminated absolute nullity as a tax sale defense.1  Under current law, “[n]o tax sale shall be set aside except for a payment nullity, redemption nullity, or a nullity under R.S. 47:2162, all of which are relative nullities.”2  It is well settled that “the language in effect at the time of the tax sale . . . applies . . . .”3  Consequently, any tax sale occurring in 2009 or later can only be nullified on one of these grounds.

A redemption nullity is “the right of a person to annul a tax sale in accordance with R.S. 47:2286 because he was not duly notified at least six months before the termination of the redemptive period.”4  After 2008, a nullity no longer occurs because the tax debtor was not notified before the tax sale. Instead, the nullity occurs if the party was not “duly notified” before the expiration of the redemptive period. With the revisions, the exhaustive list of “duly notifying” statutes found in La. R.S. 47:2122(4) intentionally does not contain the pre-sale noticing statute, La. R.S. 47:2153. The result is that a client cannot claim that the tax sale is a nullity for failure of pre-sale notice. Instead, nullity must be based on a failure of notice sufficiently in advance of the end of the redemptive period.

A payment nullity is invoked when the tax debtor can demonstrate that he actually paid the taxes for the delinquent year in question.5  A nullity under La. R.S. 47:2162 is a prohibited purchaser nullity, as happens when, for example, the tax sale purchaser is an employee of the tax collector or tax assessor. These two nullities are rare.

  • 1See Adair Asset Mgmt., LLC v. Turney, 50,574 (La. App. 2 Cir. 05/04/16), 195 So. 3d 501, 513; Alpha Cap. US Bank v. White, 2018-0827 (La. App. 1 Cir. 12/21/18), 268 So. 3d 1124, 1129; Stow-Serge v. Side by Side Redevelopment, Inc., 2020-0015 (La. App. 4 Cir. 6/10/20), 302 So. 3d 71, 76. But see Deichmann v. Moeller, 2018-0358 (La. App. 4 Cir. 12/28/18), 318 So. 3d 833, 835 (holding that a tax sale can still be declared an absolute nullity when all sides plead as such and one side files a motion for judgment on the pleadings).
  • 2La. R.S. 47:2286.
  • 3Cent. Props. v. Fairway Gardenhomes, LLC, 2016-1855 (La. 6/27/17), 225 So. 3d 441, 448.
  • 4La. R.S. 47:2122(10).
  • 5La. R.S. 47:2122(8).

8.4.4 Due Process

8.4.4 Due Process aetrahan Thu, 07/06/2023 - 14:13

In order for a tax title to convert to ownership, all parties must be “duly notified”:1

“Duly notified” means, with respect to a particular person, that an effort meeting the requirements of due process of law has been made to identify and to provide that person with a notice that meets the requirements of R.S. 47:2156, 2157, 2206, 2236, or 2275, or with service of a petition and citation in accordance with R.S. 47:2266, regardless of any of the following:

  • Whether the effort resulted in actual notice to the person.
  • Whether the one who made the effort was a public official or a private party.
  • When, after the tax sale, the effort was made.2

Failure to provide notice of the date on which the tax sale will convert to ownership creates a redemption nullity.3  However, failure to provide notice under one statute can be cured by sending notice under a different statute enumerated in La. R.S. 47:2122(4). Furthermore, the Louisiana Supreme Court has specifically held that a tax sale purchaser may send curative tax sale noticing.4

The most common due process violations are failure to provide notice to a reasonably ascertainable address and failing to send additional notice if the original notice is returned undeliverable. The U.S. Supreme Court has spoken to both situations.

As regards addresses, notice by mail or other means as certain to ensure actual notice is a minimum constitutional precondition to a proceeding which will adversely affect the liberty or property interests of any party, whether unlettered or well versed in commercial practice, if its name and address are reasonably ascertainable.5  Failure to provide notice a reasonably ascertainable address often occurs when there have been multiple tax sales. Assessors assess properties in the name of the latest tax sale purchaser.6  Forgetting that the assessed address belongs to the latest tax sale purchaser, municipalities often mail tax sale notices in the name of the tax debtor to the assessed address.

Tax collectors must take an additional noticing step if all of the tax sale noticing efforts were returned to sender: “[W]hen mailed notice of a tax sale is returned unclaimed, the State must take additional reasonable steps to attempt to provide notice to the property owner before selling his property, if it is practicable to do so.”7  If any of the tax sale noticing was returned to the tax collector, be sure that any follow-up notice was sent to a separate address. Tax collectors have been known to send a second round of notice to the same insufficient address.

  • 1La. R.S. 47:2121(C)(1).
  • 2La. R.S. 47:2122(4).
  • 3La. R.S. 47:2122(10), 2286.
  • 4Cent. Props. v. Fairway Gardenhomes, LLC, 2016-1855 (La. 6/27/17), 225 So. 3d 441, 451 (“[W]e hold that, under the language of the applicable statutes, post-sale notice to the interested tax party may be effectuated by a tax sale purchaser . . . .”).
  • 5Mennonite Bd. of Missions v. Adams, 462 U.S. 791, 800 (1983).
  • 6La. R.S. 47:2161.
  • 7Jones v. Flowers, 547 U.S. 220, 225 (2006).

8.4.5 Cancellation

8.4.5 Cancellation aetrahan Thu, 07/06/2023 - 14:22

In the rare occurrence when a tax collector fails to send any presale notice and when neither the tax collector nor the tax sale purchaser cure the pre-sale defect by sending post-sale notice, the tax debtor can file suit to have the tax sale cancelled.1  The difference between cancellation and nullification is slightly favorable economically for the tax debtor, but can be devastating for the tax sale purchaser.

When a tax sale is canceled, the taxing authority must return to the tax sale purchaser only the amount of the taxes paid. In other words, the tax sale purchaser will not receive any interest. In turn, the tax debtor is relieved of the obligation to make the 5% redemption payment and to pay 1% monthly interest. However, the tax debtor is still liable to the taxing authority for 1% per month since the tax sale.2

Because proving the elements of a cancellation claim is more difficult than proving those of a redemption nullity claim, best practice is to bring a cancellation claim in the alternative to a redemption nullity claim. Additionally, courts have also discouraged cancellation claims due to the lack of interest paid to the tax sale purchaser.3

  • 1La. R.S. 47:2153(C)(1) (“In the absence of actual notice of the sale to a tax sale party, including a transferee, or the demonstration of a reasonable effort to provide notice, where the name and address of the tax sale party were reasonably ascertainable or where the transfer was recorded after the tax collector completed his pre-sale tax sale party research, the tax collector shall cancel the sale of the property and refund the tax sale purchaser the tax sale purchase price.”).
  • 2La. R.S. 47:2127(B).
  • 3See Klein v. Henderson, 2021-0317 (La. App. 4 Cir. 11/17/21), 332 So. 3d 764.

8.4.6 Time to File

8.4.6 Time to File aetrahan Thu, 07/06/2023 - 14:24

An action for a redemption nullity is subject to a prescriptive period of 6 months from the tax debtor being duly notified (if the tax sale certificate was recorded more than three, but less than 5 years ago) or 60 days (if the tax sale certificate was recorded more than 5 years ago).1  A client who has timely filed a nullity action only needs to prove a defect in the La. R.S. 47:2156 notice. If the nullity action is untimely, your client will likely need to survive an exception of prescription by proving a defect in whichever secondary form of notice the tax sale purchaser is claiming.

The date on which prescription begins to run and the procedure for asserting the nullity will differ depending on how the tax sale debtor was duly notified.

Quiet Title Action: If your client is served with a petition to quiet title,2  prescription runs from the date of service. Note that if the tax sale was recorded more than 5 years prior, the delay for answering the suit is only 10 days. However, this shortened period to answer does not affect the nullity prescription period.3  If the tax sale purchaser has filed a quiet title action, the nullity “action may be brought as a reconventional demand or an intervention . . . ” by the tax debtor.4  A tax debtor who files a separate action to annul the tax sale risks having the nullity action suit dismissed on an exception of lis pendens.5

Monition Action: If your client receives a monition notice, the notice should state that the prescriptive period to bring a nullity action commenced at first date of advertisement.6  The proper method to counter a monition action is by “intervention in a monition proceeding under R.S. 47:2271 through 2280.”7  Just as with a quiet title action, a separate action to nullify a tax sale could be dismissed on an exception of lis pendens.

Affidavit Procedure: If your client received a tax sale notice sent pursuant to La. R.S. 47:2157, the letter should state that the prescriptive period to file a nullity action commenced on the date of the notice. In this procedure, the tax sale purchaser shifts the burden onto the tax debtor to initiate a lawsuit by filing a nullity action in the district court of the parish in which the property is located.8

  • 1La. R.S. 47:2287(A)(1).
  • 2La. R.S. 47:2266.
  • 3La. R.S. 47:2266(B).
  • 4La. R.S. 47:2286.
  • 5Dave v. Witherspoon, 2020-0239 (La. App. 4 Cir. 11/4/20), 310 So. 3d 593, 597 (“This court has recognized and held that the filing of a new suit naming new and additional parties will not defeat an exception of lis pendens. The party to the earlier filed suit is entitled to have the later filed suit dismissed as to him, and the new parties remain in the later filed suit.”).
  • 6La. R.S. 47:2275.
  • 7La. R.S. 47:2286.
  • 8Id.

8.4.7 Effect of Judgment

8.4.7 Effect of Judgment aetrahan Thu, 07/06/2023 - 14:28

A tax sale nullity judgment has no effect until the prevailing party has paid the nullity amount to the tax collector.1  The tax debtor has one year to deliver the nullity payment or else the nullity judgment will be dismissed with prejudice. This dismissal then allows the tax sale purchaser to quiet title without opposition.2

  • 1La. R.S. 47:2290.
  • 2La. R.S. 47:2291 cmt e. (“Subsection C requires payment of the costs within one year of the issuance of the final judgment declaring the tax sale a nullity and setting the costs. This period is suspended while an appeal is pending. Payment of costs must be made within this time period, or else the judgment can be vacated and the case dismissed with prejudice.”).

8.5 Other Tax Sale Defenses

8.5 Other Tax Sale Defenses aetrahan Thu, 07/06/2023 - 14:28

8.5.1 Bankruptcy

8.5.1 Bankruptcy aetrahan Thu, 07/06/2023 - 14:28

A tax sale is voidable if it was made while a bankruptcy stay was in effect.1  However, because the redemptive period is peremptive,2  a bankruptcy proceeding filed after the tax sale will not suspend the redemptive period.3

  • 1Joshua Inv. Corp. v. Home Sales Consulting, Inc., 39,251-CA (La. App. 2 Cir. 1/19/05), 892 So. 2d 151; Bertini v. Britton, 93 CA 0779 (La. App. 1 Cir. 4/8/94), 635 So. 2d 712.
  • 2La. R.S. 47:2241.
  • 3In re Curley, 572 B.R. 622, 637 (Bankr. E.D. La. 2017) (“While the automatic stay prevents AP from taking steps to quiet title, it does not stay the redemptive period.”).

8.5.2 Active Military Duty

8.5.2 Active Military Duty aetrahan Thu, 07/06/2023 - 14:30

Unless a court states otherwise, property belonging to an active-duty servicemember may not be sold for delinquent taxes.1  However, if the servicemember commences active duty after the property is sold at tax sale, federal law provides that the servicemember may redeem the property “during the period of military service or within 180 days after termination of or release from military service.”2  However, because that law also provides that it “may not be construed to shorten any period provided by the law of a State . . . for redemption,”3  the servicemember may have longer than 180 days after leaving active duty if the 3-year redemptive period under Louisiana law would provide for a longer time. During the active-duty stay, the interest charged to the servicemember is 6% per year.4

Although federal law does not shorten the redemptive period, the courts have not yet determined whether it extends the peremptive period under La. R.S. 47:2241. However, the Supremacy Clause as well as public policy in favor of protecting the rights and interests of active-duty servicemembers should favor allowing the servicemember the longer of Louisiana’s redemptive period or the 180-day period following the end of active duty.

  • 150 U.S.C. § 3991(b)(1) (“Property described in subsection (a) may not be sold to enforce the collection of such tax or assessment except by court order and upon the determination by the court that military service does not materially affect the servicemember’s ability to pay the unpaid tax or assessment.”).
  • 250 U.S.C. § 3991(c) (“When property described in subsection (a) is sold or forfeited to enforce the collection of a tax or assessment, a servicemember shall have the right to redeem or commence an action to redeem the servicemember’s property during the period of military service or within 180 days after termination of or release from military service. This subsection may not be construed to shorten any period provided by the law of a State (including any political subdivision of a State) for redemption.”).
  • 3Id.
  • 450 U.S.C. § 3991(d) (“Whenever a servicemember does not pay a tax or assessment on property described in subsection (a) when due, the amount of the tax or assessment due and unpaid shall bear interest until paid at the rate of 6 percent per year. An additional penalty or interest shall not be incurred by reason of nonpayment. A lien for such unpaid tax or assessment may include interest under this subsection.”).

9 Templates

9 Templates aetrahan Thu, 07/06/2023 - 14:32