Does a North Dakota county have to pre-qualify auction bidders or have a contract-for-deed template ready before a tax lien foreclosure sale?

Plain-English summary

Ramsey County held its annual tax-foreclosure auction on November 15, 2022. A bidder claiming to act as agent for a corporation won two properties at the cash auction. The next day, the agent returned and said he wanted to buy the properties on a contract for deed instead of paying cash. The county auditor accepted a one-fourth down payment, and a dispute followed over the procedure used.

The Ramsey County State's Attorney asked the AG for an opinion on several questions: Did Ramsey County follow the rules in N.D.C.C. ch. 57-28? Does a county have to pre-qualify bidders before the auction? Does it have to have a contract-for-deed template ready, with an interest rate set, on the day of the auction?

The Attorney General said the county handled the auction correctly. The bidder-qualification check (no delinquent taxes owed to any county) is applied at the point of contract, not before the auction. The county is the party that picks the method of sale, cash or contract for deed; if it announces a cash sale, it does not have to be ready to switch to a contract for deed at a bidder's request. And there is no statutory deadline by which a contract-for-deed template must be in hand or an interest rate must be set.

What this means for you

North Dakota county auditors and boards of county commissioners

The opinion concludes that a county is not obligated to pre-qualify bidders before the annual tax-foreclosure auction. The qualification under N.D.C.C. § 57-28-15(7) (no delinquent taxes owed to any county) applies to the highest bidder at the point of contracting, after the auction has identified the high bid. The opinion also concludes that the county chooses the format of sale (cash or contract for deed) under § 57-28-15(1), and is not obligated to have a contract-for-deed template or pre-set interest rate at the time of the sale.

Bidders at North Dakota tax-foreclosure auctions

The opinion holds that the bidder does not select the format of sale; the county does. A bidder who participates in a sale the county has announced as cash is not entitled to a contract-for-deed option, though the county may accommodate that request after the auction at its own option. The opinion also confirms that a bidder owing delinquent taxes to any North Dakota county is statutorily unqualified to be the highest bidder under § 57-28-15(7).

County state's attorneys

The opinion concludes that Ramsey County conducted its November 15, 2022 auction in accordance with N.D.C.C. ch. 57-28. It expressly relies on plain-meaning statutory construction (§ 1-02-05; Adams Cnty. Rec.; Burlington N. R.R.) for the qualification timing analysis and on N.D.A.G. 99-L-63 for the county-chooses-format conclusion.

Title examiners reviewing tax-deed conveyances

The opinion walks through the chapter 57-28 chronology: appraisal at least 30 days before sale (§ 57-28-10), commissioners' hearing on minimum price (§ 57-28-11), notice posted at least 15 days before and published once at least 10 days before (§ 57-28-14), sale on the third Tuesday of November at the auditor's office or district court (§ 57-28-13), and highest-qualified-bidder analysis at the point of contracting (§ 57-28-15).

Common questions

Q: When is the county tax-foreclosure auction held?
A: The third Tuesday of November each year, at the county auditor's office or the district court in the county, per N.D.C.C. § 57-28-13.

Q: What disqualifies a bidder?
A: Owing delinquent property taxes to any North Dakota county. The check happens once the high bidder is identified, not before the auction starts. A bidder who owes delinquent taxes anywhere in the state cannot be the high bidder under § 57-28-15(7).

Q: Can the bidder choose cash or contract for deed?
A: No. The county decides whether a sale is offered for cash or by contract for deed under § 57-28-15(1). A prior AG opinion (N.D.A.G. 99-L-63) established that the county, not the purchaser, picks the format.

Q: What is the maximum interest rate on a contract for deed?
A: Twelve percent, set by the board of county commissioners under § 57-28-15(4).

Q: What is the minimum sale price?
A: The appraised value plus all unpaid taxes, special assessments, homestead credit for special assessments, penalties, interest, and costs against the property under § 57-28-10.

Q: What if the buyer wants a contract for deed but the county announced a cash auction?
A: The county may choose to accommodate the request, but it is not required to. If it does accommodate, it can develop the contract template and interest rate after the auction. If it does not, the buyer must complete the purchase as a cash sale or forfeit the bid.

Q: How quickly must the cash purchaser pay?
A: "Promptly" under § 57-28-15(2). There is no equivalent statutory timing for contract-for-deed purchases.

Background and statutory framework

The sale of property acquired by a county through tax deed is governed end-to-end by N.D.C.C. ch. 57-28. The opinion walks through the chronology:

• At least 30 days before the annual sale, the board of county commissioners appraises each property (§ 57-28-10) and sets a minimum sale price equal to appraised value plus unpaid taxes, special assessments, homestead credits, penalties, interest, and costs.
• The board holds a public hearing on the minimum price (§ 57-28-11).
• Notice of the sale is posted at the auditor's office at least 15 days in advance and published once in the official newspaper at least 10 days in advance (§ 57-28-14).
• The annual sale itself is held on the third Tuesday of November at the auditor's office or district court (§ 57-28-13).
• At the sale, each parcel goes to the highest qualified bidder for at least the minimum price (§ 57-28-15(1)). A bidder is unqualified if the bidder owes delinquent taxes to any North Dakota county (§ 57-28-15(7)).
• The county decides whether the sale is by cash or by contract for deed. Cash purchasers pay promptly to the treasurer (§ 57-28-15(2)); contract purchasers pay the first installment, get a contract for deed in the form prescribed by the state tax commissioner, and pay interest at a rate set by the commissioners up to 12% (§ 57-28-15(3) and (4)).

On the bidder-qualification question, the AG applies the plain-meaning rule of N.D.C.C. § 1-02-05, citing Adams Cnty. Rec. v. Greater N.D. Ass'n, 529 N.W.2d 830 (N.D. 1995) and Burlington N. R.R. v. State, 500 N.W.2d 615 (N.D. 1993). The statute's text says a "highest bidder" is unqualified if the bidder owes delinquent taxes, not "a bidder" generally. That language fits the moment of contracting, after the auction has identified the high bid. The same reading appeared in N.D.A.G. 2005-L-39.

On the format-of-sale question, prior AG opinion N.D.A.G. 99-L-63 already held that the county, not the purchaser, decides whether a sale is by cash or contract for deed. The natural extension is that the county is not obligated to convert a cash sale into a contract sale after the gavel falls.

This opinion has continuing force: under N.D.C.C. § 54-12-01 and State ex rel. Johnson v. Baker, 21 N.W.2d 355 (N.D. 1946), AG opinions govern the actions of public officials until a court rules otherwise.

Citations and references

Statutes:

• N.D.C.C. ch. 57-28 (Sale of property acquired by tax deed)
• N.D.C.C. § 57-28-10 (Appraisal)
• N.D.C.C. § 57-28-11 (Hearing on minimum sale price)
• N.D.C.C. § 57-28-13 (Time and place of sale)
• N.D.C.C. § 57-28-14 (Notice)
• N.D.C.C. § 57-28-15 (Auction; qualification; cash or contract for deed)
• N.D.C.C. § 1-02-05 (Plain meaning rule)
• N.D.C.C. § 54-12-01 (AG opinion authority)

Cases:

• Adams Cnty. Rec. v. Greater N.D. Ass'n, 529 N.W.2d 830 (N.D. 1995)
• Burlington N. R.R. v. State, 500 N.W.2d 615 (N.D. 1993)
• State ex rel. Johnson v. Baker, 21 N.W.2d 355 (N.D. 1946)

Prior AG opinions:

• N.D.A.G. 99-L-63 (county chooses cash vs. contract for deed)
• N.D.A.G. 2005-L-39 (qualified-bidder check at point of contracting)

Source

• Landing page: https://attorneygeneral.nd.gov/counties-are-not-required-to-qualify-bidders-prior-to-tax-lien-foreclosure-auctions/
• Original PDF: https://attorneygeneral.nd.gov/wp-content/uploads/2023/11/2023-L-01.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain — the linked PDF is authoritative.

STATE OF NORTH DAKOTA

OFFICE OF ATTORNEY GENERAL

www.attorneygeneral.nd.gov
(701) 328-2210

Drew H. Wrigley
ATTORNEY GENERAL

LETTER OPINION
2023-L-01

Mr. Beau M. Cummings
Ramsey County State's Attorney
524 4th Avenue NE, Unit 16
Devils Lake, ND 58301

Dear Mr. Cummings:

Thank you for your letter requesting an opinion on several issues relating to Ramsey County's annual auction sale of property acquired by the county because of a tax lien foreclosure. Based upon the information provided, it is my opinion that 1) Ramsey County conducted its annual auction sale of property acquired by the county through tax lien foreclosure in accordance with the provisions of chapter 57-28 of the North Dakota Century Code (N.D.C.C.); 2) the county is not obligated to qualify bidders for the auction prior to the auction sale; 3) the county, in this circumstance, does not have an obligation under the law to provide a contract for deed template upon demand and down payment; and 4) the county, in this circumstance, does not have an obligation under the law to have set the interest rate for the contract for deed prior to the beginning of the auction. According to the facts provided, the Ramsey County auction was held in accordance with state law, therefore, it is unnecessary to address the fifth question regarding the steps needed to remedy an improperly conducted auction sale.

FACTS

Your opinion request pertains to Ramsey County's annual auction sale for tax foreclosed properties which occurred on November 15, 2022, "in accordance with the requirements of N.D.C.C. § 57-28-13." The sale was properly noticed, and the properties were properly noticed, foreclosed upon, and appraised in accordance with N.D.C.C. ch. 57-28.

The annual auction sale was held pursuant to N.D.C.C. § 57-28-15, according to the information provided. An individual who bid on properties informed the county auditor that he was an agent of a corporation (hereinafter "the Agent"). The Agent was the successful bidder on two properties. The Agent made no representation to the County prior to the auction that he intended to purchase the property by contract for deed. The published notice did not specify whether this was a cash or contract for deed sale, and the other properties sold that day were sold as cash purchases. The following day, the Agent returned to the courthouse and indicated he intended to purchase the properties by contract for deed. The Auditor accepted the one-fourth purchase price down payment, and indicated the State's Attorney would need to draft the agreement for the contract for deed. Since then, the parties have been engaged in a dispute regarding the procedure of the sale which gave rise to this opinion request.

ANALYSIS

The sale of property acquired by a county by tax deed is governed by N.D.C.C. ch. 57-28. The property must be appraised by the board of county commissioners at least 30 days prior to the annual sale. A minimum sale price of the property is set by adding this appraisal plus the cost of the taxes, special assessments, homestead credit for special assessments, penalties, interest, and costs due against the property. The board of county commissioners sets a hearing for objections to the minimum sale price of the property acquired by tax deed. The annual auction sale is held at the county auditor's office or district court in the county on the third Tuesday of November. Notice of the sale must include a property description, street address, if any, and minimum sale price for each parcel to be sold. Notice must be posted at the county auditor's office at least 15 days before the date of the sale and published once in the official newspaper of the county not less than 10 days before the date of the sale.

State law dictates that at the annual sale, each parcel must be sold at auction to the highest qualified bidder for no less than the minimum sale price as fixed before the sale. A highest bidder is unqualified if they owe delinquent taxes to any county. The sale may be either a cash sale or a contract for deed. If the purchase is made by cash, the purchaser must "promptly" pay the qualifying amount bid to the county treasurer. If the purchase is paid by a contract for deed, the purchaser must pay the first installment to the county treasurer and be given a contract for deed setting forth the terms of the sale. The contract for deed must be in a form prescribed by the state tax commissioner. The interest rate of the contract for deed must be set by the board of county commissioners at no more than twelve percent. Based upon the information provided to my office, the annual sale appears to have been conducted according to the above prescripts of state law.

Your second question focuses on whether bidders must be pre-qualified prior to the beginning of the auction. When interpreting a statute, one must first look to the plain meaning of the words used. If the plain language of a statute is clear and unambiguous, the plain language of the statute may not be disregarded under the pretext of pursuing its spirit. The statute in question here plainly states the qualification requirement applies to a highest bidder, not a bidder, in general: "[a] person is unqualified to be the highest bidder for property if the person owes delinquent taxes to any county." The qualification language plainly applies only to the person or entity eventually deemed the highest bidder, so the requirements for qualification apply at the point of contracting, after the auction sale has occurred and the highest bidder has been identified. This analysis was previously provided by this office in 2005, stating:

Sales by auction result in the formation of a contract between the seller and the buyer. Sales of real property, including county tax sales of real property, must be represented by a written contract signed by both parties. Auctioneers are statutorily authorized to bind the seller and buyer by a written memorandum of the contract if required to make a valid contract of sale .... But in order to have a valid contract, there must be at least two parties capable of entering into a contract. Individuals who owe delinquent taxes to any county are statutorily unqualified to be the highest bidder at a county tax sale, and are therefore incapable of entering into the sale contract. If the successful bidder at a county tax sale is statutorily incapable of entering into the contract for sale of the land, there is no valid contract.

The point at which the highest bidder's qualifications are examined is not prior to the sale, but at the point of contracting. Accordingly, pre-qualification of the bidder prior to the auction is not required, rather the county must make the highest bidder qualification assessment after the auction and prior to entering into any contract regarding the sale of the land. Therefore, it is my opinion that a county need not qualify bidders prior to the start of the auction sale.

The third and fourth questions focus on whether a county is obligated to provide a contract for deed template with a set interest rate to the bidder immediately after the sale. The answer to this question focuses on which party determines the format of the sale. A previous Attorney General's opinion determined that the county, not the purchaser, may determine whether real property of the county acquired by tax deed will be sold for cash or through a contract for deed. In this case, however, the county did not specify ahead of time whether this was a cash sale or a contract for deed sale. If the county had pre-determined that it was selling the properties as a contract for deed sale, a template contract for deed with a set interest rate would have been established and available upon downpayment. However, in this case, it is clear from the facts the county anticipated this would be a cash sale. Because the county is the party that selects the method of sale, the county was not obligated to accept the offer of a contract for deed sale from the Agent. As was their option, the county worked to accommodate the Agent's request after the sale and developed the contract for deed document, including the applicable interest rate. Under the circumstances in this instance, when the Agent approached and asked to purchase the property by contract for deed, the county did not yet have a template document and the board of county commissioners had not set the interest rate.

There is no legal requirement mandating when the contract for deed document be provided or at what point the interest rate is set. In fact, where the statute indicates that a purchaser must "promptly" pay the amount to the county for a cash sale, there is no similar temporal parameter for contract for deed purchases. Because the statute is silent on the issue of timing, it is my opinion that, while a county may opt to provide a contract for deed template and interest rate at the time of the sale, it is not required by law to do so.

Pursuant to N.D.A.G. 99-L-63, Ramsey County alone could decide whether it would entertain the Agent's offer to purchase through contract for deed as opposed to cash payment; the county was not required to allow this option, under these circumstances. The county, in entertaining this proposal made by the Agent after the auction sale occurred, did not need to predetermine the issues of the template of the contract for deed or the interest rate.

The county is not obligated to qualify bidders for the auction prior to the auction sale; the county does not, in this circumstance, have an obligation under the law to provide a contract for deed template with the interest rate upon demand and down payment. Therefore, based on the facts provided to my office, it is my opinion that Ramsey County conducted its annual auction sale of property acquired by the county through tax lien foreclosure in accordance with the provisions of chapter 57-28 of the North Dakota Century Code.

Sincerely,

Drew H. Wrigley
Attorney General

AMH/meo

This opinion is issued pursuant to N.D.C.C. § 54-12-01. It governs the actions of public officials until such time as the question presented is decided by the courts.