Kara Sears
Alabama's laws regarding tax liens against property allow tax collecting officials to auction or sell a tax lien to recoup delinquent property taxes instead of selling the property itself. A tax lien is a legal claim that creditors can make against a property or its owner to satisfy an unpaid debt or obligation. The property in question can be land, houses, vehicles, or any other personal property. If a tax lien is purchased at auction, the purchaser is issued a tax lien certificate, which entitles them to first refusal to purchase the tax lien for the subsequent year's delinquent taxes. The purchaser does not immediately gain ownership of the property and must wait for a redemption period to expire. If the delinquent taxes are not paid during this period, the purchaser can take ownership of the property.
| Characteristics | Values |
|---|---|
| What is a lien in Alabama? | A legal claim that creditors take against a property or its owner to satisfy an unpaid debt or obligation. |
| What is a tax lien in Alabama? | The government's legal claim over a taxpayer's property due to undisclosed income or property tax default payment. |
| What happens when a person doesn't pay property taxes in Alabama? | The overdue amount becomes a lien on the property. The county treasurer can hold a tax lien sale and sell a tax lien certificate to the highest bidder. The property owner could eventually lose ownership of the property. |
| What is the validity period of a tax lien in Alabama? | 10 years from the date the lien is filed. |
| What happens when a tax lien is purchased at auction in Alabama? | A tax lien certificate is issued to the purchaser based on the lowest interest rate bid on the tax lien. |
| What happens when a lien imposed by Sections 40-1-2 and 40-29-20 is satisfied in Alabama? | The Department shall issue a release of the lien to the person against whom the lien was claimed. |
| What is the procedure to purchase state-held tax-delinquent property in Alabama? | Submit an electronic application and remit payment within 10 calendar days of receiving the price quote. |
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What You'll Learn
Alabama tax lien laws
In Alabama, a tax lien is a legal claim that creditors can make against a property or its owner to satisfy an unpaid debt or obligation. The property may be land, houses, vehicles, or any other personal property. A lien effectively makes the property act as collateral for the debt. Once a tax lien is filed, the state's claim against the property owner becomes valid.
In Alabama, if a property owner does not pay their property taxes, the overdue amount becomes a lien on the property. The county treasurer can then hold a tax lien sale and sell a tax lien certificate to the highest bidder. The winning bidder from the sale cannot get immediate ownership of the property. Instead, the property owner is given a redemption period to catch up on the overdue amounts. If the property owner does not pay off the tax debt during this period, they will likely lose the property permanently.
The holder of a tax lien certificate has the first right to purchase the tax lien for the subsequent year's delinquent taxes on the property. If the holder does not exercise this right, any liens on that property held by the lienholder will be subject to auction or private sale. A tax lien certificate may be transferred and assigned to another party.
In Alabama, tax liens are recorded in the county where the property is located. Once the state registers a lien, its validity continues until the assessed tax rate is satisfied, which is usually within 10 years from when the tax lien is filed. If the lien is not redeemed within this time frame, it becomes void.
It is important to note that the laws regarding tax liens and property sales can vary within a state, and it is always advisable to consult a licensed attorney for specific legal questions or to understand your rights under the law.
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Redemption of tax liens
In Alabama, if a property owner fails to pay their property taxes, the county treasurer can hold a tax lien sale and sell a tax lien certificate to the highest bidder. This means that the winning bidder has paid the delinquent taxes on behalf of the property owner, and the bidder now has a claim against the property. The property owner can then redeem the lien, essentially buying it back from the bidder, within a certain time frame.
The time frame for redemption varies depending on who purchased the tax lien. If the state buys the tax lien, the property owner can redeem it at any time before the title passes out of the state. If another party buys the tax lien, the property owner has three years from the date of the sale to redeem the property. If the property owner occupies the property, they may be able to redeem it even after the redemption period expires, but they will likely need to get court approval.
To redeem a tax lien, the property owner must pay the amount specified on the tax lien certificate, which includes the delinquent taxes, interest, penalties, fees, and other costs. There is also a $10 redemption fee. Redemption payments must be made in certified funds, such as cash, cashier's check, or money order.
If a tax lien is not redeemed within the specified time frame, the purchaser of the tax lien or their heirs can initiate foreclosure proceedings to take ownership of the property. However, even if the redemption period has passed, it is still possible for the property owner to redeem the tax lien by taking legal action.
It is important to note that the laws and procedures regarding tax liens and redemption can be complex, and it is always advisable to consult with an attorney or legal professional for specific guidance and to understand one's rights and options.
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Tax lien auctions
In Alabama, tax lien auctions are a method for collecting delinquent property taxes. The law permits the sale of tax liens instead of the sale of properties. All tax liens representing unpaid and delinquent taxes on real property are subject to a public auction.
The auction date is announced in mid-March, and the auction is held in the last week of April. The auction is conducted by the county's Tax Collecting Official, who lists the parcel number, the name of the last known parcel owner, the taxes due, and all associated cost fees and interest. The bidders purchase the tax liens for the property, which includes the principal amount of delinquent taxes, accrued interest, penalties, fees, and costs.
The bidding process for the auction is an "interest rate bid down" format, where bidders bid down the interest rate from a maximum of 12% simple interest per annum prorated monthly. The lowest acceptable bid is 0% per annum, and bidding can be in 1% increments. The winner is determined by the lowest interest rate bid.
If a tax lien is purchased at auction, a tax lien certificate is issued to the purchaser based on the lowest interest rate bid. The certificate holder has the first right to purchase the tax lien for any subsequent year's delinquent taxes on the property. This right to purchase subsequent tax liens must be maintained until redemption or foreclosure. The certificate may also be transferred and assigned to another party.
If the property owner redeems the certificate of purchase, the investor receives their money back, plus interest at the rate they bid. If the tax lien is not redeemed within ten years, the certificate of purchase expires, and the lien becomes void.
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Property tax sales
Alabama's laws regarding tax liens against property allow tax collecting officials to auction or sell tax liens to collect delinquent property taxes instead of selling the property itself. This is governed by Alabama Code § 40-10-180.
The public auction of tax liens is held between March 1 and June 15 of the current ad valorem tax year. If a tax lien is purchased at auction, a tax lien certificate is issued to the purchaser based on the lowest interest rate bid on the tax lien. The purpose of the tax lien auction is to secure payment of delinquent real property taxes in Mobile County. Mobile County property owners are required to pay property taxes annually to the Revenue Commissioner, unless exempt. Real property taxes become due and payable on October 1 of each year and become delinquent if not paid before midnight, December 31.
If the holder of a tax lien certificate does not bring a foreclosure action within 10 years of the tax lien auction or sale, the tax lien certificate expires and the lien becomes void.
To purchase a tax lien at auction, one must be registered and approved through GovEase, and all accepted bidders must participate in the online auction at GovEase.com. After the auction, any unsold tax liens will be available for purchase via private sale or future auction, unless or until redeemed.
If you are interested in purchasing tax delinquent property, you may request a price quote by submitting an electronic application. Once your price quote is processed, you will have 10 calendar days to remit your payment. If the state has held the tax sale certificate for less than three years, the purchaser will be issued an assignment of the certificate. If the state has held the tax sale certificate for over three years, a tax deed will be issued to the purchaser. However, neither an assignment nor a tax deed gives the holder clear title to the parcel. It is advisable to consult an attorney before purchasing tax delinquent property.
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Tax lien certificates
In Alabama, a tax lien is a claim against a property owner's assets, which is filed by the Department of Revenue or another state or county agency. This occurs when a property owner fails to pay their taxes, and the overdue amount becomes a lien on the property. The lien is effective against other creditors once a Notice of Tax Lien has been filed.
The State of Alabama has the authority to collect delinquent property taxes by either selling a tax lien or selling the property itself. The sale of tax liens is conducted through a public auction, where the tax lien certificate is sold to the lowest interest rate bidder. The holder of the tax lien certificate has the right to purchase the tax lien for subsequent years' delinquent taxes on the same property. This right must be exercised to maintain the lien, and the holder can also transfer the certificate to another party. However, if the holder does not initiate foreclosure within 10 years of the auction, the tax lien certificate expires and becomes void.
When the state or an individual purchases a tax lien at a tax sale, the first document produced is a tax certificate. This certificate entitles the holder to immediate possession of the property and grants them the right to perform preservation improvements. The purchaser can also collect full payment of delinquent taxes from the property owner. If the outstanding tax balance is resolved within three years, the investor is reimbursed their investment with accrued interest and fees.
It is important to note that neither the tax sale certificate nor a tax deed provides the holder with clear ownership of the property. The original property owner has redemption rights for three years, which is the longest in the country. During this period, they can redeem the property by paying past-due taxes, fees, and improvements. After this period, the investor can initiate foreclosure proceedings.
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Frequently asked questions
A lien in Alabama is a legal claim that creditors can take against a property or its owner to satisfy an unpaid debt or obligation. A tax lien is a government claim over a taxpayer's property due to undisclosed income or property tax default payment.
If you don't pay your property taxes in Alabama, the overdue amount becomes a lien on the property. The county treasurer can then hold a tax lien sale and sell a tax lien certificate to the highest bidder. If you don't pay off the amount of the lien within a specified amount of time, the winning bidder can get ownership of your home.
Once a lien has arisen, it will continue until the liability for the amount assessed is satisfied, released, or becomes unenforceable by reason of the lapse of time (i.e. 10 years from the date the lien is filed).
A tax lien sale is a public auction of tax liens. The tax lien auction is held to secure payment of delinquent real property taxes.
The bidding process for a tax lien sale is done through an online auction platform. Payment for the tax lien must be made no later than two days after the auction.
