07-Mar-2006

The Tennessee Court of Appeals has held in CMH Homes, Inc. v. McEachron, (Tenn. App., Sept. 29, 2005) that the purchaser at a tax sale did not acquire the mobile home that was located on the property that was being auctioned.

The Tennessee Court of Appeals looked closely at TCA § 67-5-802 (a) (1) for the decision in this case. The portion of the TCA code that they looked at provided that house trailers, mobile homes and all other similar movable structures used for commercial, industrial or residential purposes shall be assessed as Real Property as an improvement to the land where located. The reason for this provision was so that the taxing authority would have some method for calculating the tax for property on which a mobile home was located, not so that the taxing authority could impose a tax on the mobile home.

Therefore, the tax that was delinquent in this case that ultimately led to the tax sale was not for taxes imposed on the mobile home, but solely on the land upon which the mobile home was located. The General Assembly reasoned this out by stating that if the tax was imposed on the mobile home and not on the land beneath it, if the mobile home was moved, the owner of the land would not be responsible to pay taxes on the land.

The case gave a great example of this reasoning upheld by the Court of Appeals. An owner of a mobile home park has the responsibility to pay property taxes for the entire property for which the mobile park resides even though a portion of that tax is attributable to the value of mobile homes which are not owned by the land owner.

In this case, the mobile home was held as security for the repayment of a note by a third party. This was also another factor that the court took into consideration. This result could have been different if the property was being sold as a result of a judgment or as a result of another creditor situation. This case hinged primarily on the tax lien statute.