Court of Appeals Clarify’s Limitation on Tax Liens

The Legal Advisor

Thomas Stoops
By Thomas A. Stoops


In the case of Pete Span v. Maricopa County Treasurer et al. in which we represented Mr. Span the Court of Appeals reversed a grant by the lower Court of summary judgment against the landowner Mr. Span holding that a tax lien purchased in 1995 did not expire in 2005. The Court of Appeals disagreed and held that the original tax lien expired in 2005 and therefore reversed the lower court’s ruling.

Maricopa County’s position had been that the certificate of purchase from a tax auction had not expired under A.R.S section 42-18208 (a ten year statute of repose.) The reason given was the purchase of later delinquent taxes kept the CP active and tolled the statute from running. Mr. Span argued that the lien had expired under A.R.S. section 42-18208 because the statute does not provide for tolling based upon the purchase of subsequent taxes.

Superior Court granted the County’s Motion for Summary Judgment and held A.R.S. section 42-18208 when read in conjunction with A.R.S. section 42-18121 and other applicable tax lien foreclosure statutes in title 42 provides no statutory procedure for certificate of purchase containing endorsed “sub-taxes” newer than 10 years to expire.

On appeal, the County argued that the trial court had correctly held that the payment of subsequent taxes or what they referred to as “sub-taxes,” tolled the running of the statute of repose. The County also took the position that the County’s failure to give the CP owners notice of the CP’s upcoming expiration, automatically extended the validity of the lien because such notice was a prerequisite for the lien to expire.

Court of Appeals held that the only question before it was whether a property tax lien expired under A.R.S. section 42-18208(A). The Court noted that when a property owner is delinquent on taxes the County secures payment by selling a tax lien at auction. The Court observed that if a person holding such a tax lien wishes to do so, they may pay subsequent years taxes and have those payments added to the Certificate of Purchase and those additional payments bear interest at the rate stated in the Certificate of Purchase. Prior to 2002 there was no time limit for a tax lien holder to redeem the Certificate of Purchase or to foreclose on the property. Therefore, it resulted in many old tax liens on the County Treasurer’s roles and it became the desire of the County Treasurers’ to have those tax liens expire at some point.

In 2002, the Arizona State Legislature amended A.R.S. section 18-201 to include a ten year statutory lifetime for tax liens purchased at auction pursuant to A.R. S. section 42-18114 from and after the date of the act. However, this did not resolve the issue of those tax liens purchased prior to 2002, so in 2003 the State Legislature extended the ten year expiration date to liens purchased prior to 2002 by enacting A.R.S. section 42-18208. So if an action is not commenced to foreclose, the right of redemption within ten years after the last day of the month in which the lien was purchased then the Certificate expires and the lien is void. The Court held that it is clear from the plain language and history of A.R.S. section 42-18127, -18201, and -18208 that the legislature intended certificates of purchase to expire after ten years unless the purchaser begins a foreclosure action on the right of redemption before that time. The Court noted that the Legislature addressed the retroactivity of statutes of limitations in A.R.S. section 12-505 giving a plaintiff one year from the effective date of the new law to file suit.

The Court also dealt with the County’s position that the notice provisions required by A.R.S. section 42-18208(B) are a prerequisite to expiration. The County took the position that even if the County was wrong in it’s statutory interpretation about the expiration of the CP, based on the payment of subsequent years taxes the CP still did not expire because the County had not sent out the notice that is required under A.R.S. section 42-18208(B). The Court agreed that the statutes notice provision provides that the County is required to notify purchasers of the upcoming expiration of their lien. The statute requires this notice to be given at least six months prior to the expiration day which is ten years after the date the lien was purchased. However, the Court held that nothing in the statute indicates that the expiration date hinges on completion of the notice requirement. Therefore, the Court of Appeals rejected the County’s position that because the County had not sent the notice and the lien did not expire.

This ruling has great significance for tax lien holders in Maricopa County. Ever since the passage of the statutes relating to expiration of tax liens and in particular A.R.S. section 42-18208(b) which addresses liens purchased prior to 2002, the County has taken the position that the expiration of tax liens was tolled for one year for every subsequent year’s taxes paid by the CP holder. Because of this interpretation the County has not sent the notice to such CP holders six months prior to expiration as mandated by statute. Thus, a CP holder’s lien expires after ten years despite the fact no notice has been sent by the County. Since the County has made its prior legal position on this matter public, there is a strong likelihood of misunderstanding on the part of CP holders and property owners alike. Although the Court of Appeals decision is a memorandum decision, it does provide important guidance for property owners, Certificate of Purchase holders and hopefully Maricopa County itself.