Cautionary tale – buying at a Washington tax sale where the county failed to give notice to the mortgagee.

A tax deed generally vests clear title to the tax parcel in the grantee. RCW 84.64.080.  The conveyance of clear title is conditioned, however, upon proper notice to other interest-holders.  The county is required to purchase a title report and then give “reasonably calculated” notice of the foreclosure to the disclosed holders of other interests, including mortgagees. RCW 84.64.080(4). “Reasonably calculated” notice does not always require personal hand-to-hand service; the statute permits mailing. RCW 84.64.080(4).

The case of Okanogan Cnty. v. Various Parcels of Real Prop., 13 Wn. App. 2d 341, 466 P.3d 1114 (2020) serves as a cautionary tale for tax foreclosure purchasers relying-upon the county giving proper notice to mortgagees.  In the case, the county purchased the title report which identified a mortgage against the parcel.  The county attempted to mail the foreclosure notice to the mortgagee’s address of-record disclosed in the title report, but, by reason of transcriptional error, put the wrong address on the mailing.  The mailing was returned to the county as un-deliverable due to the address being non-existent.

Problematically, the county did not take any corrective action after receiving notice the mailing was un-deliverable.  Had the county reviewed the recorded mortgage, it would have become apparent the mailing address was wrong.  But the county did not review the mortgage and issue a new mailing to the correct address, nor did the county research other addresses for the mortgagee.  Making matters worse, the county did not disclose within the court docket that notice to the mortgagee failed.

The parcel sold at foreclosure auction with the buyer under the impression there was proper notice to the mortgagee.  The mortgagee successfully challenged the sale for failure of the county to give proper notice.  The result was the mortgage remained intact against the purchaser's title. 

The take-away for bidders at tax foreclosure sales is that proper notice by the county to lienholders cannot be assumed.  Counties make mistakes.  Furthermore, a county noticing mistake may not be readily-apparent from the case file. 

If there is any question as to whether proper notice was given by the county to a mortgagee based on the existing court file, interested bidders should consider requesting supplemental service records from the county.  Also, the fact that a mortgagee with a sizeable outstanding balance has not intervened and paid the tax delinquency before auction is a strong sign the mortgagee is unaware of the sale, which makes confirming proper service that much more important.