Failure to Tender Correct Amount Renders Redemption of Agricultural Land Untimely
On December 16, 2020, the Iowa Court of Appeals issued an opinion on the timeliness of a redemption of agricultural real estate sold at a sheriff’s sale. Because the assignee did not pay the full amount due within the redemption period, the redemption attempt was untimely.
After the original owner of the agricultural land failed to meet the terms of the mortgage, the bank foreclosed on the property. The foreclosure decree stated the property may be sold at a sheriff’s sale, but that the debtor could redeem the property for one year after the sale. The property sold to a new owner by a sheriffs’ sale. Ten months later, a third party tendered a check to the clerk of court to redeem the property after the original owner assigned his right of redemption to her.
After an initial challenge where the Court of Appeals held that a farm debtor may assign his right to redeem, the case returned to the trial court for a determination as to whether the assignee timely exercised her right of redemption.
The trial court found that the assignee was entitled to redeem the property at a 21 percent interest rate. The new owner asked to have the redemption set aside, arguing that the assignee did not timely redeem the property because she did not pay the entire purchase price, including costs and interest, within the redemption period. The district court found the assignee did timely exercise her right of redemption, but that the full redemption amount was $1,938,800. The assignee, who had paid only $1,937,001, tendered another check for the remaining $1,799 balance. Both parties appealed.
The redemption amount includes an interest rate “at contract rate on the certificate of sale from its date.” Iowa Code § 628.13(1). The promissory note provided two interest rates, a variable interest rate of 4.25 percent and an interest rate of 21 percent upon default.
On appeal, the assignee claimed the interest rate should be 4.25 percent and provided cases showing that the default interest rate is not used for a redemption of a property. However, the sheriff’s levy and sale listed the interest rate at 21 percent. Additionally, the mortgage stated that a foreclosure proceeding qualified as a default and increased the interest rate to 21 percent. Therefore, the court affirmed the 21 percent default interest rate.
Timeliness of Redemption
A debtor may exercise the right of redemption within one year from the date of sale by paying the entire sale price plus the remaining amount of the lien including costs and interests. Failure to strictly comply within the statute’s one-year time period forfeits the right of redemption. See Nw. Mut. Life Ins. Co. v. Hansen, 218 N.W. 502, 505 (Iowa 1928); Tharp v. Kerr, 119 N.W. 267, 268 (Iowa 1909).
The assignee paid $1,799 short of the amount due. The court relied upon Sibley State Bank v. Zylstra, where the defendant attempted to redeem two properties, but did not pay the correct amount during the redemption period. 2020 WL 4814072 (Iowa Ct. App. Aug. 19, 2020). Despite the defendant’s attempt to pay the difference, the court in that case ruled that the attempt to redeem the properties was invalid.
In the same way, the assignee did not strictly comply with the statutory requirement to pay the full amount due within the redemption period. Therefore, the court ruled that the assignee’s attempt to redeem the property was insufficient and untimely.
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