Tax Lien Foreclosure Action - Multiple Lienholders - Alabama OTC Tax Lien

[Christine Garnier]

Alabama has now implemented the new tax lien system and  many are left wondering how it really works, especially with the OTC tax liens.  When multiple liens have been issued on a property, we now see multiple lienholders for the same property. This fractional interested ownership is truly a turn off. Now what happens when one of the lienholders want to file a foreclosure action after the three mandatory year period? 

1) Does this lienholder have to buy the liens purchased from previous lienholders, before filing the foreclosure action? If so, what is the process or worse, what if the other lienholder refuse to sell? 

OR

2) Can the lienholder who wants to proceed with the foreclosure action proceed and then pay the previous lienholders back, their investment + 12%?

It is so unbelievable to see that there is little to no information on the subject. Even calling the Counties is to no avail because they all say the same thing: we do not know.  I keep hearing that no one has yet foreclosed on a tax lien yet since the system is so new in Alabama, however, investors need to know what is the proper way to do it, especially when there are multiple lienholders for the same property. 

[Denise Evans]

Ala. Code Section 40-10-197(a) says:  At any time not less than three years after the auction or sale of a tax lien but not more than 10 years after the auction or sale, if the tax lien has not been redeemed, a holder of all of the sold tax lien certificates for a parcel of property may bring in the circuit court of the county in which the property is located an action to foreclose the right to redeem and quiet title to the property in the name of the holder of the tax lien certificate.

Two points: The three years starts to run from the date of the auction. Next, the statute says you have to own ALL of the tax lien certificates, but most experts agree you have to own all of them that qualify for the three year holding period. In other words, if Alpha buys Year One and Bravo buys Years 2, 3, and 4, then Bravo can file the foreclosure lawsuit.  I think this is on a list to be clarified in the 2023 legislative session.