Alabama Tax Sale Redemption Rights

[Denise Evans]

There are four different tax sale redemption periods in Alabama.  At the time of the tax sale, the investor receives a Certificate, which entitles it to possession of the property. Three years after the tax sale, the investor may demand a tax deed. Before the tax deed, the person who did not pay his taxes is still technically the owner. Despite that, I always refer to the defaulting taxpayer as the "former owner" because it makes things easier.

1.  The "administrative redemption period" continues for three years after the date of the tax sale. Redemption is accomplished through local county offices.  The investor is allowed to keep all rents collected before redemption.

2. The "judicial redemption period" is called that for historic reasons. It does not require a lawsuit.  If the investor has not taken possession of the property, then the former owner has three years, from the date the investor takes possession, to redeem. If nobody is in possession of the property, the law assumes the former owner is still in possession. For tax sale properties owned by the State, the law assumes the former owner is still in possession.  If the investor takes possession on the earliest possible date--the date it receives the tax certificate, five days after the auction--then the administrative redemption period and the judicial redemption period will both burn off at the same time.  If the administrative redemption period has expired, the judicial redemption is negotiated directly with the investor, or resolved by the courts. The investor is allowed to keep all rents collected before redemption.

3. The "defective tax sale redemption period" arises when the tax sale was void for some reason. The former owner can contest the tax sale, reclaim the property, and pay only the taxes and 12% redemption interest, but will not be required to pay for preservation improvements or insurance premiums.  In order to defeat this type of redemption, the investor must adversely possess the property for three years, starting on or after the tax deed date. This is called the "short statute of limitations" if you want to research it further.  The investor must disgorge all collected rents if the owner redeems.

4.  The "lienholder redemption period" is for one year, and applies to all recorded liens as of the date of the tax sale. Mortgage lenders, judgment creditors, IRS--they all have redemption rights they can exercise in order to protect their liens. Their redemption rights are during the "administrative redemption period" or the "lienholder redemption period," whichever is longer.  The investor must send certified mail, return receipt requested, notice to all lienholders regarding the tax sale. There is no requirement for WHEN the notice must be sent.  On the date the notice is received by the lienholder, that starts the one-year lienholder redemption period.  If the notice is not sent until ten years after the sale (as an example) then the lienholder's redemption rights start on that date.  If a lienholder redeems under this rule, the investor is allowed to keep all rents collected before redemption.