Each September, Pennsylvania’s taxing districts – the County, School District and Municipality – may seek to recoup unpaid real estate taxes via Upset Sales. While the process behind these sales is heavily regulated by the Pennsylvania Real Estate Tax Sale Law (RETSL), properties may sell for far less than market value at auction, making them desirable for investors. Unfortunately for an investor, one complication of these sales is that you only receive a tax deed. In other words, you will not have “marketable title.” Fortunately, there is a process by which you can obtain clean title – a Quiet Title action. Learn more about this process and how an experienced real estate attorney can help.
What is a Quiet Title?
A Quiet Title action is a powerful legal tool which asks the court to clear up “clouds” or “quiet” the title to property. Relative to an Upset Sale, after you receive a tax deed, you will need to file a lawsuit with the county court.
Essentially, you are asking the court to “quiet” the title against all competing claims – in this case, the previous owner of the property. Your desired outcome is that the court determines you are the true and lawful owner of your purchased property. Whether the Upset Sale was good or bad is not at issue for a Quiet Title action; rather, you are seeking a confirmation that the sale went through and it was either unchallenged, or it was challenged and you were successful.
Why You Want a Quiet Title, Indeed
Again, one of the problems with Upset Tax sales is that you only receive a tax sale deed. This is opposed to a warranty deed, which is what the majority of deeds are. Warranty deeds warrant against the quality of the title one is transferring. There are two primary types:
- A general warranty deed guarantees that the property is free of liens, claims, and other encumbrances throughout its history
- A special warranty deed is more common and only warrants against the same issues during the time in which the grantor owned the property
A tax sale deed, which is what you receive from an Upset Sale, does not warrant against anything, and you are assuming all the risk in buying the property. Because of this, you will not be able to obtain title insurance or put the property up as collateral to a loan or borrow against its equity. You also will not be able to sell the property at market value because you could only quitclaim it, i.e.transfer it without any warranty as to the quality of the title.
Support with a Quiet Title
Purchasing a property at Upset Sale can bring great rewards – real estate at a fraction of its market value – but a little leg work needs to be done in order to maximize your investment. In addition to defending any claims to set aside the sale filed by the record owner, you will need to file an action in Quiet Title to obtain marketable title. This may sound daunting, and that purchasing at an Upset Sale may not be worth your time, but these Quiet Actions can move quickly and efficiently with a prompt and aggressive attorney on your side.
Connect with our real estate attorneys in Allentown, PA to explore your legal options.
