LAYING DOWN THE LAW – Death and taxes: The Statutory Requirements for Purchasing, Redeeming and Foreclosing on Tax Liens in Arizona

Christopher J. Charles, Esq.	Phillip A. Overcash, Esq.

Two things in life are certain: death and taxes. And if you don’t pay your taxes, there can be severe consequences. For example, if you fail to pay your property taxes, someone else can swoop in, pay the tax liability, and then ultimately claim title to your property.

Under Arizona law, a tax levied on real property is a lien on the assessed property. A.R.S. § 42-17153 (A). At any time before either installment of the tax becomes delinquent, the county treasurer shall accept a partial payment or payments of the tax in an amount of at least ten percent of the installment and in an amount of at least ten dollars. A.R.S. § 42-18056.

To secure the payment of unpaid delinquent taxes on real property, county treasurers are authorized to sell tax liens. A.R.S. § 42-18101. The purchaser of a tax lien receives a certificate of purchase, also known as the tax lien certificate, on the sale and the tax year or years for which the tax lien was sold. A.R.S. § 42-18118.

The certificate of purchase may be redeemed by any of the following persons:

1. The owner;
2. Any person who wants to pay on behalf of the owner by making a charitable gift; or
3. The owner’s agent, assignee or attorney, or any person who has a legal or equitable claim in the property, including a certificate of purchase of a different date.

A.R.S. § 42-18151.

A real property tax lien may be fully redeemed at any time:

1. Within three years after the date of sale; or
2. After three years but before the delivery of a treasurer’s deed to the purchaser or the purchaser’s heirs or assigns.

However, the lien “must be fully redeemed before the delivery of a treasurer’s deed to the purchaser.” A.R.S. § 42-18152(B). If a certificate of purchase is not fully redeemed within three years of the date of purchase, the purchaser may bring an action in the Superior Court to foreclose the right to redeem. A.R.S. § 42-18201.

Any person who is entitled to redeem may do so at any time before judgment is entered, notwithstanding that an action to foreclose has been commenced. However, if the redeemer has notice of the foreclosure action at the time of redemption, the court will assess the costs incurred by the plaintiff, including reasonable attorney fees to be determined by the court. A.R.S. § 42-18206.

Before bringing an action to foreclose the right to redeem, the purchaser of the certificate of purchase must give notice of the intent to file the foreclosure action by certified mail to the property owner of record, as well as to the treasurer of the county in which the real property is located. The purchaser must send that notice at least 30 days before (but not more than 180 days before) filing the foreclosure action. A.R.S. § 42-18202.

The statute further provides that “[i]f the purchaser fails to send the notice required by this section, the purchaser is considered to have substantially failed to comply with this section.” A.R.S. § 42-18202(C). Therefore, “[a] court shall not enter any action to foreclose the right to redeem under this article until the purchaser sends the notice required by this section.” Id.

If the court finds that the sale of the tax lien is valid and that the tax lien has not been redeemed, the court shall enter judgment in favor of the purchaser and against the owner of record “foreclosing the right of the defendant to redeem.” A.R.S. § 42-18204(A)(1). The court shall further enter an order “directing the county treasurer to expeditiously execute and deliver to the party in whose favor judgment is entered, including the state, a deed conveying the property described in the certificate of purchase.” A.R.S. § 42-18204(A)(2).

Buying certificates of purchase can be a good investment vehicle, but the investor must be willing to be patient, and also accept that the owner of the property has the right to redeem the tax lien.

If you or someone you know has a question regarding tax liens, please call our office today to schedule a meeting with Christopher J. Charles or Philip A. Overcash.

Philip A. Overcash is an Attorney with Provident Law® who practices in the areas of complex commercial and real estate litigation. He has successfully represented numerous international, national and Arizona-based corporations and individuals, government entities and insurance companies in a wide array of legal disputes involving real estate, contracts, construction defects, insurance coverage and bad faith, employment law, trademark and trade secrets, and appeals. Philip is admitted to practice in Arizona’s State and Federal Courts, and he is a Member of the Arizona State Bar Association and Maricopa County Bar Association. He can be reached via email at Philip@ProvidentLawyers.com or at 480-388-3343.

Christopher J. Charles is the Founder and Managing Partner of Provident Law®. He is a State Bar Certified Real Estate Specialist and a former “Broker Hotline Attorney” for the Arizona Association of REALTORS® (the “AAR”).  He is also an Arbitrator and Mediator for the AAR regarding real estate disputes; and he served on the State Bar of Arizona’s Civil Jury Instructions Committee from 2011-2015 where he helped draft the Agency Instructions and the Residential Landlord/Tenant Eviction Jury Instructions.

Christopher is a licensed real estate instructor and he teaches continuing education classes at the Arizona School of Real Estate and Business. He can be reached at chris@providentlawyers.com or at 480-388-3343.