Redeeming creditor of a tax-sale property does not have a priority lien against excess funds arising from that sale

In a highly-anticipated decision, the Georgia Supreme Court created a “bright-line rule” that “a redeeming creditor of a tax-sale property does not have a priority lien against excess funds arising from that sale.” DLT List, LLC v M7Ven Supportive Housing & Development Group, 301 Ga. 131, 800 S.E.2d 362 (2017).

This decision overruled a previous line of decisions by the Court of Appeals that a creditor who redeems property after a tax sale did obtain a first priority to the excess funds from the sale.

In DLT List, a lienholder called “Design Acquisition” redeemed a property from DLT, and the property was put back into the Defendant-in-fifa M7.  Because it had redeemed, and acquired a first priority lien on the real property, then Design Acquisitions (relying on the prior line of decisions) claimed to also have a first priority on the excess funds.  But the Georgia Supreme Court noted that OCGA § 48-4-43 only provides that “the amount expended by the [redeemer] shall constitute a first lien on the property” O.C.G.A. § 48-4-43 (emphasis added).  It then reasoned that “excess funds from a tax sale are personal property that is separate and distinct from the real property itself” so that “the priority lien acquired by a redeeming creditor is exclusive to real property, and the priority lien does not apply to the excess funds.”

This decision has significant implications for persons who are redeeming from tax sales and how they may get paid back, if at all, for the funds they advance.