In the 2022 regular legislative session, the West Virginia legislature significantly revised the process and timeline for redemption of real estate sold at a tax sale. The new law, effective June 10, 2022, overhauls the process for payment of property taxes, tax sales and redemptions with the goal of streamlining the process. It also amends the current statute to allow for payment plans and payment by credit card.

During the legislative session, the banking industry worked with the State Auditor’s Office to ensure that the new legislation would incorporate specific requirements for the service of the notice of redemption included in the existing law to provide protection to real estate owners and lien holders. Although these specific notice requirements are included in the revised statute, the new law significantly shortens the timeline for redemption from a minimum of four months to 45 days.

Most financial institutions take proactive steps to address the risk presented by a potential tax sale. Many lenders roll property taxes into the borrowers’ loan payments and then make the tax payments on behalf of the property owners. Some lenders require borrowers to establish escrow accounts for taxes or hazard insurance as permitted under the Real Estate Settlement Procedures Act. Other lenders include in their loan agreements that the failure to keep current on property taxes constitutes default of the loan and would allow the bank to demand immediate payment of the remaining balance. While these steps can reduce the risk that a tax sale will occur, they cannot prevent a tax sale from jeopardizing a bank’s collateral position in all cases. In response to the new West Virginia law, banks should review their internal controls and procedures to consider the shortened time periods.

The new redemption procedure and timeline is set forth below:

Tax Purchaser Prepares List of Persons to be Served. Under WV Code § 11A-3-52, following the tax sale by the Auditor, a tax sale purchaser must prepare a list of interested parties to be served with a notice to redeem. This list must be prepared within 120 days following the tax sale, and the tax purchaser much deposit or offer to deposit with the auditor the costs of preparing and serving the notice. If the tax purchaser fails to meet these requirements, then it may receive an additional 60 days to comply if it requests a written extension within 30 days of the expiration of the time period and pays the greater of $100 or 10% of the amount paid on the date of sale plus a $25 extension fee.

Service of Notice to Redeem on Interested Persons. After the Auditor receives the list from the tax purchaser, it then prepares the notice to redeem and serves it on the persons named in the list. Both the real estate owner and the lien holder should be included in the list. WV Code § 11A-3-55 provides that the notice must be served by the Auditor within 30 days following the request for the notice from the tax sale purchaser. If the notice is served on persons residing or found in the State of West Virginia, then it must be served by the following means: (A) in the manner for service of process commencing a civil action, (B) by certified mail, return receipt requested or (C) by other types of delivery service courier that provide a receipt. The notice must be served in a similar manner on persons who do not reside in or cannot be found in the State of West Virginia.

Publication of Notice to Redeem Where Address Unknown. If the address of a person is unknown to the tax sale purchaser and cannot be discovered by the tax sale purchaser, then the notice must be published as a Class III-0 legal advertisement and such publication must be commenced within 60 days following the request for the notice from the tax purchaser. If publication is necessary, then the notice must also be mailed to the last known address of the person to be served.

Service of Notice to Redeem on Occupants. If the real estate subject to the tax lien was classified as Class II property at the time of assessment, then the Auditor must also forward a copy of the notice to redeem addressed to the “occupant” of the property by mailing a copy of the notice by first class mail or in the manner provided for service of process commencing a civil action to the physical mailing address for the subject property.

Although the new requirements for service of the notice to redeem are similar to the prior law, the only time limitation relating to the issuance of the deed to the tax purchaser is set forth in WV Code § 11A-3-55, which provides that the notice must be mailed and, if necessary, published by the Auditor at least 45 days prior to the first day that a deed may be issued to the tax purchaser. Under the prior law, the tax deed could not be issued before April 1 of the second year following the sheriff’s sale of the property. Because this time period was set by statute, it provided property owners with a minimum of four months to receive notice of the right to redeem and to gather the funds to redeem the property.

The notice to redeem issued by the Auditor should include the date after which the deed to the tax purchaser will be made if the owner of the real estate fails to redeem by that date, presumably 45 days from the date notice is sent since that is the earliest date the deed to the tax purchaser can be issued under the new law. However, the property owner and the bank may not receive the notice to redeem for a week or so, depending on the timeliness of the mail delivery, or may not see the notice published in the newspaper. This means that the real estate owner could have less than 45 days to redeem the property. Banks should review their internal procedures and consider this shorter redemption period when assessing the impact of the new law.