IRM
5.10.8 – JUDICIAL
SALE
OF LEVIED PROPERTY
5.10.8.1 (10-01-2004)
Introduction to Judicial Sales
1.
Employees
of the
IRS
are authorized to sell property in which the
United States
brought action to foreclose a lien on a taxpayer's property or
rights to the property. The cases normally originate from a
revenue officer's request for a tax lien foreclosure suit under
IRC 7403. In the past, the U.S. Marshal's Service has conducted
these sales. The Order of Sale may now stipulate that a Service
employee, usually the PALS, may conduct the sale.
2.
Once a
judgment is entered in favor of the government, a judicial sale is
held in accordance with 28
USC
section 2001. The applicable notice procedures are found in 28
USC
section 2002. The court supervises the judicial sale from judgment
entry through sale confirmation.
3.
The type of
sale is discussed with and recommended by local counsel to the
Department of Justice. There are two types of judicial sales:
·
Public
Auction
·
Private
Sale
4.
The judge
enters an Order of Sale in the judicial proceeding. This order
directs:
·
Sale
of a specific piece of property with proper notice
·
Specific
time and place of sale
·
Specific
terms and conditions of the sale
5.
The United
States Attorney can request the establishment of a minimum bid for
a public auction sale. In the case of a private sale, the court
establishes a minimum bid sale amount.
6.
The Order
of Sale provisions generally mirror those of the related judgment.
The terms and conditions of the sale are under the discretion of
the court and may either be specific or leave some items open for
the employee to determine while arranging the sale. The judge can
order either a public or private sale.
7.
The
purchaser receives clear title to the property in a judicial sale
after confirmation by the court. The court may order prior
encumbrances paid from the sale proceeds or the property may be
sold subject to the prior encumbrances.
8.
There is no
right of redemption in a judicial sale.
5.10.8.2 (10-01-2004)
Order of
Sale
1.
The PALS or
other specified employee can provide input to Counsel and the
Department of Justice for the preparation of the judgment and
Order of Sale. When the judgment is entered, review the Order of
Sale to determine how to proceed with the sale.
2.
Unlike a
seized property sale, an Order of Sale can contain specific
provisions to facilitate the sale of the property. In some
instances, a foreclosure action was recommended by the revenue
officer because an administrative sale was attempted and failed,
or the administrative sale was never attempted because it would
not have been successful.
3.
The Order
of Sale may contain specific provisions that require the taxpayer
or debtor to take certain actions which can help facilitate a sale
of difficult property. These actions may include instructions to:
·
Refrain
from damaging the property or otherwise interfering with the sale
·
Refrain
from filing deeds, liens, or other documents that would hurt the
sale
·
Vacate the
property and turn over the keys to the property on a specific date
whether before or after the sale
4.
The Order
of Sale may contain a Notice of Sale. If it doesn't, the employee
will need to prepare one.
5.
Contacts
made on cases in litigation are not subject to third party
reporting requirements.
6.
In certain
situations, such as when the taxpayer may try to interfere with
the sale, the court can order the Service to conduct a private
sale. This sale is different from a public sale because the
employee will attempt to independently locate a buyer for the
subject property.
5.10.8.3 (10-01-2004)
Pre-Sale Actions
1.
The sale is
similar to a sale of seized property; however, there are some
differences and other actions to take in order to conduct a
judicial sale.
2.
28
USC
section 2001 requires that the public sale be held:
·
At the
courthouse of the county, parish, or city in which the greater
part of the property is located
·
Upon the
premises of the property itself
·
At some
other place the court may designate
3.
The
employee should provide Counsel with information as to the best
location for the sale so the information can be included in the
Order of
Sale
.
4.
The
employee will conduct a current title search or secure a current
title search report, to include:
·
The Lis
Pendens filing date
·
Judgment
information related to the Order of
Sale
·
Other
recorded encumbrances, including those files after the
commencement date of the court action
·
Any
delinquent real property taxes, whether recorded or not
·
Any other
recorded encumbrance holders who will be affected by the sale of
the property
·
The NFTL
recording information under which the suit was brought
5.
The
employee will contact all senior encumbrances and secure a current
payoff amount from them.
6.
The Order
of Sale will normally list the parties that should receive a copy
of the Notice of Sale. Mail the Notice of Sale to all encumbrances
of record. In addition, the Order of Sale may also require
delivery of the Notice of Sale to the taxpayer or debtor in the
judgment. The Order of Sale should specify the required method of
delivery, and in some cases it may require the preparation of a
Judicial Sale Process Receipt and Return document (available on
the PALS web site).
7.
In most
cases the court order will contain an eviction notice. The Service
will not conduct the eviction, but will coordinate with the U.S.
Marshall's office for the eviction. In most cases, the employee
will pay the eviction expenses as part of the sale expenses with
the U.S. Marshall's office conducting the eviction. The Order of
Sale should indicate the above coordination concerning the
eviction.
5.10.8.3.1 (10-01-2004)
NFTL Information
1.
The
employee must ensure that the NFTL's are correct, and if
applicable, were timely refiled by Collection. If the NFTL's are
not current, the judgment priority date changes which can change
the equity in the property being sold.
2.
If the NFTL
is expired and has self-released, coordinate with counsel to have
Collection file a revocation of lien release and re-record the
NFTL's. In this case, the judgment priority date relates back to
the Lis Pendens filing date. If the NFTL's are still valid and
have been refiled properly, the judgment priority relates back to
the original NFTL recording date.
Note:
Verification of priority dates is
extremely important.
5.10.8.4 (10-01-2004)
Private Sales
1.
A private
sale may be preferred for difficult situations and properties.
This type of sale is rare, but it can be ordered by the court,
usually at the request of the Department of Justice.
2.
If the
court determines the best interest of the estate will be conserved
through a private sale, the Service will attempt to locate a
purchaser for the property.
3.
The court
will appoint three disinterested parties to appraise the property.
The purchase price obtained by the employee may not be confirmed
at less than two-thirds of the appraised value.
4.
Before the
court confirms a private sale, the employee must publish the terms
of the private purchase agreement in a newspaper or newspapers of
general circulation as directed by the court at least ten days
before confirmation.
5.
The private
sale will not be confirmed if another potential purchaser tenders
an offer, under the conditions of the court, which offers at least
a ten percent increase over the published purchase price and
original offer.
5.10.8.5 (10-01-2004)
Notice of
Sale
1.
The
employee must publish the Notice of Sale (Exhibit 5.10.8–1) for
public auctions per the legal requirements. Section 2002 of 28
USC
contains the legal requirements for advertising a judicial sale.
The Notice of Sale must be published once a week for at least four
weeks prior to the sale in at least one newspaper regularly issued
and of general circulation in the county, state, or judicial
district of the
United States
where the realty is situated.
2.
In
addition, the Notice of Sale should be posted and advertised in
order to market the property and attract prospective bidders. The
Notice of Sale may be posted at:
·
The county
courthouse
·
Other
county offices
·
The post
office
·
The local
IRS
office
·
Any other
location that could attract prospective bidders
3.
The Notice
of Sale information should also be included on the internet. The
employee should inform any prospective bidders (and include on the
internet advertisement) that it is a judicial sale and not a
seizure sale. The benefits of a judicial sale should be explained
to the prospective purchasers.
5.10.8.6 (10-01-2004)
Sale
Day Actions
1.
A public
auction judicial sale is similar to a seized property sale. The
employee will make the opening statement regarding the type of
sale, property being sold, and the conditions of the sale. This
information should all be contained in the Notice of Sale.
2.
In
addition, it is important for the employee to state that:
A.
The sale is
a result of a judicial foreclosure of a Notice of Federal Tax Lien
by the United States Department of Justice.
B.
The
taxpayer or debtor has no rights of redemption.
C.
The
successful purchaser is responsible for the eviction of any
current tenants or residents of the sold property, if not provided
for otherwise in the Order of
Sale
.
D.
The Court
will confirm the sale under Rule A-570 of the local rules of the
United States District Court. A deed executed after sale
confirmation will discharge the property from all liens,
encumbrances, and titles over which the
United States
has priority.
E.
The sale
shall be free and clear of the taxpayer's or debtor's interests.
3.
After
making the opening statement, the employee will begin the public
auction sale. At the conclusion of the bidding, the employee will
make the following statement: "In accordance with the
provisions of 28
USC
sections 2001 and 2002, I hereby declare this property sold to the
highest bidder for the sum of $ _______."
5.10.8.6.1 (10-01-2004)
Payment of Bid
1.
The court
will determine:
·
How the
purchaser tenders the deposit
·
Payment of
the bid price
·
How the
Service will deposit the remittance
2.
Coordination
between the employee specified to conduct the sale, Counsel,
Department of Justice, and the U.S. Attorney in the early planning
stages will make this aspect of the sale go smoothly.
3.
Upon
declaring the property sold, the employee will issue a letter to
the purchaser (Exhibit 5.10.8–2) to indicate:
·
The amount
of the successful bid and name of the purchaser
·
The date
and description of the property sold
·
The type of
payment and amount received
·
If payment
is deferred, the due date and amount due for the balance
·
The sale is
subject to confirmation of the court before a deed can be issued
4.
The
employee must convert any cash remittances to conform to the court
order and forward the payment as directed by the Order of
Sale
.
5.
Expenses
incurred on the account should be charged to the taxpayer's
account with the input of transaction code (TC) 360 for the amount
of the applicable expense.
5.10.8.6.2 (10-01-2004)
Default on Bid
1.
If full
payment is not received, or if the deferred payment is not
received within the prescribed period, declare the sale null and
void and re-advertise and sell the property again.
2.
The new
purchaser at the new sale will receive the property or rights to
property free and clear of any claim or right of the defaulting
purchaser.
3.
The deposit
on a deferred payment may be forfeited or retained by the
United States
as liquidated damages. Consult with the trial attorney to
determine whether legal action is appropriate.
4.
The amount
deposited will be applied to the expenses of sale, to include the
costs of advertising.
5.10.8.7 (10-01-2004)
Declaration
1.
Immediately
after the sale, provide the trial attorney with a declaration.
2.
The
declaration will include the following information:
·
How, when
and where the Notice of Sale was published
·
The number
of bidders present at the sale
·
The
successful bid amount
·
A breakdown
of the sale expenses (expenses should be charged to the account
with a TC 360)
·
The name
and address of the successful bidder
·
The
original "publisher's affidavit "
·
Any other
information required by the trial attorney specific to the case
3.
Provide a
copy of the declaration to the Technical Services advisor who
maintains the permanent sale records for seizures.
5.10.8.8 (10-01-2004)
Closing Memorandum
1.
Prepare a
memorandum titled, "Proceeds from the Judicial Sale of Real
Property," and include the following information:
·
Case number
·
Name and
address of the taxpayer or debtor
·
Name and
address of the purchaser
·
Sale
amount
·
Previous
deposit amount, if any
·
Full
payment remittance amount
·
Breakdown
of expenses of sale, including name, address, amount, and services
rendered
·
Application
of the proceeds
Note:
If any senior encumbrances will be paid
through the proceeds, include the name, address for payment, type
of encumbrance, amount of payoff, and date through which the
payoff amount is good.
2.
Attach
copies of the expense invoices, including copies of the
publisher's affidavit and the information secured from the senior
encumbrances representing the current payoff amounts.
3.
Provide the
Department of Justice with the:
·
Original
memorandum
·
Remittance
·
Attachments
4.
A copy of
the memorandum should be retained in the sale file, and a copy
should be sent to:
·
U.S.
Attorney
·
Counsel
·
Technical
Services advisor
5.10.8.9 (10-01-2004)
Deed Issuance
1.
Upon
confirmation of the sale by the Court, Technical Services will
prepare and issue a deed in accordance with the laws of the state
in which the real property is situated. See Exhibit 5.10.8–3 for
a sample of a deed issued for property sold under a judicial sale.
2.
The deed
will be prepared in triplicate and will be forwarded through
Counsel to the trial attorney assigned the case for approval.
After approval by the trial attorney, the Area Director or
delegated authority will sign the deed. The delegated authority to
sign these deeds is the same as the delegated authority to sign
deeds for seized property (SB/SE Delegation Order 5.1). The deed
will then be notarized and either recorded or given to the
purchaser of record.
5.10.8.10 (10-01-2004)
Permanent Record
1.
A permanent
record of the administrative judicial sale file is maintained by
Technical Services and will contain copies of the:
·
"Proceeds
from the Judicial Sale of Real Property" memorandum
·
Sale
Declaration memorandum
·
Judicial
"Order of
Sale
"
·
Notice of
Sale
·
Deed
Exhibit 5.10.8-1 (10-01-2004)
Notice of
Sale
Reference
IRM
5.10.8.5(1)
|
Notice
of Real Estate Auction
|
|
Under an Order of Judicial Sale entered in
United States
v ___________, the
United States
will offer to sell at public auction property located in
___________, _____________ located at
________________________________.
|
|
Enter Legal Description:
|
|
Date and Time of Auction:
|
|
Location of Auction:
|
|
Minimum Bid:
|
|
Terms and Conditions of
Sale
|
|
The successful bidder shall be required to deposit at the time of
the sale with the Internal Revenue Service, Property
Appraisal and Liquidation Specialist, $_________, with the
deposit to be made by certified check or cash. Before being
permitted to bid at the sale, bidders shall display to the
Internal Revenue Service proof that they are able to comply
with this requirement. No bids will be accepted from anyone
who has not presented that proof.
|
|
The balance of the purchase price for the realty is to be paid to
the Internal Revenue Service, Property Appraisal and
Liquidation Specialist, within thirty (30) days after the
bid is accepted by certified or cashier's check payable as
instructed by the Internal Revenue Service, Property
Appraisal and Liquidation Specialist. If the bidder fails to
fulfill this requirement, the deposit shall be forfeited and
shall be applied to the expenses of the sale, with any
amount remaining returned to the bidder. The realty shall
again be offered for sale, under the terms and conditions of
the judgment and decree. The
United States
may bid as a creditor against its judgment without any
tender of cash.
|
|
The government reserves the right to reject any and all bids and
to withdraw the property from sale. The sale shall be free
and clear of all transfers and/or conveyances after
________, ____. The sale shall be subject to building lines
if established, all laws, ordinances, and governmental
regulation (including building and zoning ordinances),
affecting the premises, and easements and restrictions of
record, if any.
|
|
The United States District Court entered a judgment that
___________________ owned the property at the time the
federal tax lien arose.
United States
v ________________, ___________. The judgment is now final.
The
United States
will sell the right, title, and interest of
_________________ in the subject property, and
__________________ will have no right to redeem the property
after the judicial sale.
|
|
The property is offered for sale "where is" and
"as is" and without recourse against the
United States
. The
United States
makes no guaranty or warranty of condition of the property,
or its fitness for any purpose. The
United States
will not consider any claim for allowance or adjustment or
for the rescission of the sale based on failure of the
property to comply with any expressed or implied
representation.
|
|
The Court will confirm the sale under Rule A-570 of the Local
Rules of the United States District Court for the _________
District of _____________. A deed executed after
confirmation shall discharge the property from all liens,
encumbrances, and titles over which the
United States
had priority.
|
|
|
|
Important Information
|
|
|
|
This is not an advertisement of a sale of seized property. This
is an information notice only regarding a sale being
conducted by the Internal Revenue Service as a result of the
foreclosure of an Internal Revenue Service Federal Tax Lien
by the Department of Justice.
|
|
Additional information can be found at
http://www.treas.gov/auctions/irs or call (xxx) xxx-xxxx.
The information stated in other hyperlinks on this web page
does not apply to this type of sale. It is important that
any interested purchaser contact trial attorney
______________________ at (xxx) xxx-xxxx or Property
Appraisal and Liquidation Specialist _______________________
at (xxx) xxx-xxxx for more information regarding this sale.
|
Exhibit 5.10.8-2 (10-01-2004)
Letter to Purchaser Reference
IRM
5.10.8.6.1(3)
|
|
Date:
|
|
Purchaser's Name
|
|
|
Purchaser's Address
|
|
|
|
|
|
Dear:
|
|
|
Receipt
for Deposit
|
|
On (enter date) the real property located at (enter physical
address) was sold at public auction under an (amended) order
for foreclosure of Federal tax liens and order of sale of
real property located at (enter physical address), county of
(enter county). Case No. (enter case number), The
United States
v. (enter all party names).
|
|
The above property was sold to you as the highest bidder for
$____________.
|
|
This is a receipt for the deposit (or full payment) of
$____________ for the purchase of this property as received
by (enter PALS NAME), Property Appraisal and Liquidation
Specialist for the Internal Revenue Service, Employee No.
(enter number).
|
|
(If applicable) The balance of the purchase price,
$_________________, must be received by (enter PALS NAME),
Internal Revenue Service, (enter address and phone number),
on or before (enter date of final payment) by (enter time).
The payment must be made by (enter type of payment and who
to make it out to as per the court order). If the purchaser
fails to fulfill this requirement, the deposit shall be
forfeited and shall be applied to cover the expenses of
sale.
|
|
A deed will be issued upon final payment and sale confirmation by
the court.
|
|
|
|
Purchaser's Signature:
|
___________________
|
|
Date:
|
___________________
|
|
Name of PALS
|
___________________
|
|
Date:
|
___________________
|
|
Witnessed:
|
___________________
|
|
Date:
|
___________________
|
Exhibit 5.10.8-3 (10-01-2004)
Deed Reference
IRM
5.10.8.9(1)
|
DEED
TO
REAL
PROPERTY
|
|
THIS INDENTURE, made this ______ day of __________, 200_ by and
between (enter area director's name, Compliance Area
Director, Area ____, authorized delegate of the Treasury,
grantor; and (enter name of purchaser), (enter how title to
be held), grantee.
|
|
WITNESSETH
|
|
WHEREAS, the United States District Court for the (enter
District), in a Judgment entered on (enter date of
judgment), in the case of the United States of America v
(enter case name and number), ordered that the federal tax
lien be foreclosed against the hereinafter described real
property in order to pay delinquent Internal Revenue taxes
assessed against (enter taxpayer's name).
|
|
AND
WHEREAS, the said property was sold on (enter date of sale)
to (enter name of purchaser) for the sum of $(enter amount),
the receipt of which is hereby acknowledged, does grant,
bargain, and sell to (enter purchaser's name), all right,
title, and interest in the real property in (enter county
and state where the property is located) described as:
|
|
(ENTER THE LEGAL DESCRIPTION OF THE PROPERTY)
|
|
The property commonly known as (enter the common street address
and the county recorder's parcel number, if applicable).
|
|
The property shall be free and clear of all interests of the
defendants, (enter the taxpayer(s)' name(s)). The property
shall be free and clear of all transfers and/or conveyances
after (date lien filed).
|
|
IN WITNESS WHEREOF, the grantor has hereunto set his hand on the
date first above written.
|
|
________________________________
|
|
|
|
Signature
|
Title:
|
|
