28-Mar-2007

The Tennessee Court of Appeals held in State of Tennessee v. Delinquent Taxpayers (Tenn. App., Nov. 2, 2006) that the purchaser at a tax sale is not automatically entitled to be reimbursed for repairs made to the property prior to redemption. In Tennessee, the amount that a property owner must pay to redeem real property that has been sold for delinquent taxes is governed entirely by statute. TCA §67-5-2703 governs this issue in the State of Tennessee. The court determined that certain expenses are recoverable.
However, the expenses that are recoverable are those that are expended “to preserve the value of the property.” This is what TCA § 67-5-2703 allows.

The Courts are a little unclear on what exactly is recoverable under the phrase “to preserve the value of the property.” However, the Courts lean toward the conservative side when determining what costs fit between the guidelines. The statute in no way was designed to let the buyer have free rein to make any repairs and be paid back for everything if the delinquent taxpayer redeemed the property.

The moral of this story is to be very careful when making any repairs within the 1 year redemption period. There is always the chance that the taxpayer will tender the money needed in order to redeem the property and any money that you have expended in the meantime may not be reimbursed to you.