August 2026 Judicial Update

AAR’s Legal Team monitors state and federal appellate courts to bring you takeaways from cases that could impact your clients/customers or your business. Below are recent cases involving property rights, tax sales, contracts, and other issues affecting the real estate industry.

United States Supreme Court

Tax Foreclosure Auctions Determine Surplus Equity

In Tyler v. Hennepin County, Minnesota, et al. (U.S. 2023), the Supreme Court established that the government cannot pocket the profit when they sell a tax-delinquent property for more than the owner owed. In those cases, the surplus belongs to the former owner. This term, in Pung v. Isabella County, Michigan (U.S. 2026), the Court had to answer the obvious follow-up question: surplus based on what value – the property’s appraised fair market value, or whatever it actually sold for at auction? The Court sided with the auction price, so long as the sale itself was conducted fairly. The decision clarifies that a fairly conducted tax foreclosure auction establishes the measure of surplus equity owed to the former owner. In other words, the property’s auction price (not what it might have sold for on the open market) controls.

Private Property Owners Control Firearm Restrictions

Wolford v. Lopez (U.S. 2026) addressed whether a state may prohibit concealed-carry permit holders from bringing firearms onto privately owned property that is otherwise open to the public. The Court held that a state may not impose a blanket restriction on concealed carry in these settings. The decision reinforces the role of private property owners in determining whether firearms are permitted on their property. For businesses and property owners, firearm policies should be clearly established and communicated, and real estate professionals should be aware that restrictions may vary by property.

11th Circuit Court of Appeals

Property Value Must Be Based on Realistic Use

In Savannah Shoals, LLC v. Commissioners of Internal Revenue (11^th Cir. 2026), the Eleventh Circuit considered how a property’s highest and best use should be evaluated when determining value. The court upheld the Tax Court’s conclusion that the proposed quarry use was not supported by market demand and feasibility, rejecting a significantly higher valuation claimed by the property owner. The decision reinforces that a property’s value is based on realistic, supportable uses and not simply a possible future use.

Alabama Supreme Court

Judicial Redemption Deadlines Begin When Tax Deed Rights Arise

Ex parte Howard Ross (Ala. 2026) addressed an unresolved question in Alabama law: when does the three-year clock start ticking on an owner’s right to judicially redeem property after a tax sale? The Court held it is not triggered simply because the tax-sale purchaser takes possession. Instead, the period begins once the purchaser becomes entitled to demand a tax deed. The Court also confirmed that an owner seeking judicial redemption must still have possession of the property (whether actual, constructive, or “scrambling”). Both pieces of the ruling (the timing of the clock and the possession requirement) provide clearer guidance for determining whether judicial redemption remains available.

A City's Choice Not to Upgrade Drainage is Not Negligence

In The City of Mountain Brook v. Rodney E. Miller and Mary Leah Miller (Ala. 2026), the Court considered whether a city could be held liable for flooding caused by an allegedly inadequate stormwater drainage system. The Court held that a municipality’s decision about whether to expand or upgrade drainage infrastructure are discretionary planning decisions, not negligent maintenance. As a result, municipalities generally cannot be held liable simply for choosing not to improve existing drainage capacity. For property owners near creeks, ditches, or other flood-prone areas, this highlights the importance of flood insurance as one of the few practical avenues for recovering flood-related losses.

Alabama Court of Civil Appeals

Tax Deeds Alone Do Not Guarantee Ownership

Rounding out this summer’s tax-sale theme, Stoney Point Landing Homeowners Association, Inc. v. Gary T. Lee and Rebecca Wilson (Ala. Civ. App. 2026) reaffirms that obtaining a tax deed does not guarantee an unchallenged ownership interest. Purchasers still need to take timely steps, such as actual possession of the property or otherwise protecting their interest within the three-year window, or the original owner can reclaim it. The case underscores that a tax deed marks the beginning of a purchaser’s ownership claim, not the end of it. Taking possession or otherwise formally securing the property are among the concrete steps available to a purchaser in the years after a tax sale.

Redemption Must Be Made from the Current Property Owner

Also addressing redemption rights, Howard Ross v. Janet Hampton (Ala. Civ. App. 2026) clarified that a person seeking to redeem property after a sheriff’s sale must redeem from the party who currently holds the purchaser’s interest in the property. Because the purchaser had transferred their interest by deed before redemption was attempted, redemption could not be made from the original purchaser. The decision reminds parties pursuing redemption should first confirm ownership through public land records before taking action.