South Dakota
How It Works
South Dakota counties can choose to sell or keep tax liens on delinquent properties. Three years after a tax lien certificate is sold, the lienholder may then apply for a tax deed, which grants absolute title to the lienholder. The property owner has the right to redeem until the tax deed is issued. Because the tax deed grants absolute title to the lienholder, the lienholder keeps any profits from any subsequent sale.
An exception to home equity theft occurs when a county chooses to reconvey a property to the former owner by quitclaim deed for the total amount that was owed, including all taxes, interest, and costs. But it is important to note that the government has no obligation to make such a reconveyance.
The Impact
Data collection is still in progress.
Why It Matters
When homeowners fall behind on their property taxes, South Dakota allows county treasurers to sell tax liens to private investors. Investors can sell a home after three years if the debt and accumulated interest and fees have not been paid. Investors keep all profits from a sale, while homeowners lose all the equity built in their home, regardless of how small their tax debt was at the time of sale.Tax-delinquent South Dakota homeowners have three years after the tax certificate sale to redeem their property. Once the redemption period expires, the private investors (lienholders) can apply for a tax deed to the property, which grants them absolute title. The tax deed allows the lienholder to keep the property or any profits from a future sale. Former owners lose not only their property but also any equity they had in it. In other words, they’re left with nothing.
Counties can choose to sell the property back to the previous owner for the total accumulated taxes, interest, and penalty fees. However, counties have no obligation to do so.
Approximately half of South Dakota’s counties sell tax liens that enable private investors to take everything from delinquent homeowners. These counties include Pennington and Minnehaha.
Until recently, North Dakota also allowed local governments to engage in home equity theft. But in 2021, North Dakota legislators took a huge step forward in protecting homeowners’ property rights by passing a law that ended the practice in the state.
According to the Fifth Amendment of the U.S. Constitution, the government cannot take private property without paying just compensation. Home equity theft is unfair and unconstitutional. South Dakota should follow in North Dakota’s footsteps and end home equity theft now.
Resources
Statement of Principles On Ending Home Equity Theft
Legal Appendix Download
State Summaries Download
South Dakota Home Equity Theft Laws
Does the law commonly protect owners’ equity?
- Analysis
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No. In most cases, the state does not protect equity.
- Citation
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S.D. Codified Laws § 10-22-27.
Are there any exceptions to that rule?
- Analysis
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Maybe. The county may reconvey by quitclaim deed to the record owner of the property for consideration of at least the amount of the taxes, interests, and costs represented by the tax deed. Otherwise, there is no obligation to sell the property or provide just compensation for the lost equity.
- Citation
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S.D. Codified Laws §§ 10-25-41, -12.
Does the government sell tax liens, or does it sell property outright, and what procedures does it use for the sale?
- Analysis
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The government can sell its tax liens to private purchasers for the full amount of taxes, interest, and costs, stating the lowest rate of interest at which the bidder will pay the taxes due against the property. The highest interest rate bid allowed by statute is 10%. If a bid is not received at public auction, the county can sell the tax certificate at a private sale.
- Citation
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S.D. Codified Laws § 10-23-8.
What interest and penalties accrue for delinquent taxes, and who collects them?
- Analysis
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Prior to the sale of the tax certificate, the delinquent taxes accrue interest at a rate of 0.83% per month. The tax certificate purchaser bids down the interest rate, with a maximum annual rate of 10%.
- Citation
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S.D. Codified Laws §§ 10-21-23, -8.
What is the redemption period—the length of time to pay the debt prior to permanently losing title?
- Analysis
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At least three years after the tax certificate sale. At any point before the issuance of the tax deed, the owner can redeem by paying the tax certificate amount.
- Citation
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S.D. Codified Laws §§ 10-24-1, 10-25-1.
If equity is stolen, who profits?
- Analysis
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The government or other tax deed holder keeps the equity value of the property with no obligation to sell the property. The government may sell the tax-deeded property back to the homeowner for the taxes due.
- Citation
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S.D. Codified Laws §§ 10-22-27, 10-25-41, -12.
How much time does the previous owner have to claim the surplus proceeds, and what are the procedures for claiming them?
- Analysis
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N/A
- Citation
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N/A
What types of foreclosures are used in the state?
- Analysis
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Automatic. Immediately after 60 days after service of the notice of intent to apply for a tax deed, the treasurer will prepare a deed for each property subject to an unredeemed tax certificate. This conveys fee simple absolute to the deed holder.
- Citation
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S.D. Codified Laws § 10-25-11.
What types of notice does the state require?
- Analysis
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(1) Notice of tax certificate sale, (2) notice that a deed will issue on the property if unredeemed, and (3) notice of intent to take the tax deed.
- Citation
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S.D. Codified Laws §§ 10-23-2, 10-26-4, 10-25-2.