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Updated about 1 year ago on . Most recent reply

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Denise Evans#1 Tax Liens & Mortgage Notes Contributor
  • JD, CCIM , Real Estate Broker
  • Tuscaloosa, AL
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Alabama Tax Sale Redemption Rights

Denise Evans#1 Tax Liens & Mortgage Notes Contributor
  • JD, CCIM , Real Estate Broker
  • Tuscaloosa, AL
Posted

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.

Most Popular Reply

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Ashley G.
  • Specialist
  • Birmingham, AL
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Ashley G.
  • Specialist
  • Birmingham, AL
Replied

I learned this the hard way, go down to the redemption department and make sure you let them know who you are and ask they upload papers from you stating any repairs you have made and any proofs of contact. If you have a dishonest taxpayer they do have the option to file an affidavit stating that you, the investor, have not responded to their written request for redemption amounts, they will then be allowed to redeem the property. You could lose your preservation improvements and insurance premiums. You will have to find a lawyer, file a petition, it will get messy, time-consuming and expensive. If you receive a "verification of expenses form", contact the taxpayer and give them the amount needed to redeem that covers your preservation improvements cost and insurance and then take the proof of contact to the redemption department as well. This is not a requirement so ask nicely that they do this and they will, it will prevent the homeowner from circumventing the process. If they do try the office will already have information from you proving that you have contacted the taxpayer and they will not allow the taxpayer to redeem without your signature approving it.  

Also, anyone purchasing tax delinquent property in Alabama should really go to Denise Evans website and get her Tax Sale book. Denise's book is worth every penny and then some. If I had purchased this book before I purchased my first tax property I could have saved myself a bit of a headache. Luckily I had it when the taxpayer pulled this nasty stunt.  The form I needed to undo the redemption was there in the appendix along with case law and information about the redemption process. 

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