What effect does a tax foreclosure have on an easement?
Category: Maryland Real Estate Law
January 31, 2018
Recently, we were contacted by a company who held an easement for the use of a portion of a parcel of property. The owner of the parcel had failed to pay the property taxes for the parcel and a tax foreclosure had been initiated. The easement holder was concerned that its easement would be extinguished by the foreclosure.
Tax foreclosure of the servient estate
We advised the company that, in Maryland, a tax foreclosure of the servient estate will not extinguish an easement, provided that the easement is recorded or may be observed by an inspection of the property.
Prior to 1967, Maryland courts held that a tax foreclosure judgment vested in plaintiff fee simple title free from all encumbrances and alienations, including easements. The courts reasoned that a “purchaser at a tax sale, when the proceedings are regular, is clothed with a new and complete title in the land, under an independent grant from the sovereign authority, which bars or extinguishes all titles and encumbrances of private persons, and all equities arising out of them.” This was the prevailing viewpoint until 1967, when the legislature updated the statute.
Currently, pursuant to Tax-Prop. § 14-844(b), a tax foreclosure judgment “vests in plaintiff an absolute and indefeasible title in fee simple in the property, free and clear of all alienations and descents of the property occurring before the date of the judgment and encumbrances on the property, except taxes that accrue after the date of sale and easements of record and any other easement that may be observed by an inspection of the property to which the property is subject.” The courts have interpreted this statute to provide fairly broad protections of easements. For example, an easement is “recorded” for purposes of the statute, if the easement is set forth in the property’s plat and the deed merely references the plat.
With our advice, the company was able to plan accordingly and avoid any costly mistakes.
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