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Alabama Tax Sale Redemption Rights
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.
Sorry, I said David Henson for prior comment and it should have been @Andrew Ling
@Denise Evans
Very informative. Thank you very much
@Denise Evans I do have some redemption questions. I am not sure if I interpreted everything correct that is written in your book, hopefully you can answer my questions here:
I received a Tax Deed (tax sale date: 2014) on december 4th, 2018. The owner called me last week and wants to redeem. He told me that he will send me an affidavit. Before I can sign the affidavit I will need to know what I can charge him:
- I did not yet take possession; can I still ask for the 12% interest?
- Is the 12% interest only on the additional accruals and not from the amount paid to the state?
- If so: where do I get the information on the tax amount of the previous years so that I can calculate the additional accruals? On http://eringcapture.jccal.org/caportal/CAPortal_MainPage.aspx under the redemption button the property is no more shown
- how will he pay me if he agrees on the amount due: directly to me and I confirm payment? Or does he pay the county and they pay me?
Thanks a lot for your answer.
Reto
You get 12% interest whether you take possession or not
All taxes continue to accrue interest at 12%. It is not 12% on the purchase price from the state. You will have to get the worksheet from ADOR for how they calculated the purchase price. Sometimes they add the next year's taxes even though not yet due. Usually they calculate the interest into the future. If you bought on November 1 and they calculated interest through December 15 for your purchase price, and you get your deed on November 15 and the taxpayer redeems on December 1, all they ow you is what you paid, because no additional interest will accrue until December 16.
You must get the info from ADOR. I don't know why they don't automatically provide it as part of the price quote.
If the county is involved, THEY (the county) calculates the interest and he pays the county. Do you have only a tax certificate?
@Reto Winkler, In rereading your question, I see you received the tax deed. The county should not be involved. There should be no affidavit. I don't know what he says he will send to you. He redeems directly from you. The affidavit is when there is an administrative redemption from the county during the first 3 years after the auction, when there is still only a tax certificate and not a tax deed.
@Denise Evans Thanks for your answer. We received a "Verification of allowable expenses by tax sale purchaser". It is an official document from Jefferson County Tax Collector that we now need to sign. It looks like the county is involved and the former owner already paid the county. We will call the county and clarify.
Since we did not take possession and did not make any preservation improvement and also not pay any insurance premium I guess there are no additional funds that we can claim besides the 12% per annum. Is this correct?
@Reto Winkler, if you have a tax deed, the county is out of the picture. Someone is scamming you or someone at the county has made a big mistake. Call the county and ask them what is going on.
Also, @Reto Winkler, if the taxpayer already paid the county, the county would not create an Affidavit. Call the county. You have something weird going on here.
@Andrew Ling (1) The 3 year judicial redemption starts when you take and hold exclusive possession. When you give notice to vacate, you are not yet in possession. When you file an ejectment lawsuit, you are not yet in possession. If you have a signed ejectment order from a judge and the appeal period has expired, THEN you are in possession. If you are using the property or renting it to someone else who is using it pretty much constantly, that is another way to be in possession. (2) The best way to give notice to vacate is by regular and certified mail. (3) The trailer was not sold in the tax sale. The trailer is personal property. Only real property was sold.
@Denise Evans After talking to the County we learned that they handed out the wrong document. We now set a price and will do a quit claim through a lawyer and his trust account. Looking forward finishing the first deal!
That's great, @Reto Winkler. Let me know when it closes.
@Denise Evans Thanks for the great information. I’m about to start jumping on the tax deed wagon in Alabama to jump start my investment dreams. I have a question. If you buy the deed for a home that is vacant, can you legally enter the home the owner can’t be reached or found? I’m looking at purchasing a tax deed for a propoerty that I was told may be vacant, but I’m confused as to how I would even gain access to the property if that is the case? And how would I be able to rent or sale the property in that instance of no owner being present? By purchasing the tax deed, does the investor own the home essentially through the redemption period in Alabama? I heard that an investor can evict an owner that doesn’t want to pay the “rent”? Just a couple of questions I have to ease my suspicions about buying tax deeds.
You can DIY take possession of a house that is abandoned. That is different from vacant. Abandoned means owner has departed and has no intention of ever returning, selling, renting, or giving it to someone else such as a child. Vacant means nobody there right now, even it it's been a long time. It is REALLY hard to prove a property as abandoned. You can give notice to vacate and then file an ejectment lawsuit. If the owner redeems, they also have to pay your legal fees for the ejectment lawsuit. If you have a tax deed, you own it subject to possible redemption rights, but you are the owner. You can get homeowner's insurance, etc.
Originally posted by @Jared Irby:
@Denise Evans This is really great information. If there is a mortgage or other liens on a tax sale property, during the "lien holder redemption period", does the lien holder have to pay for preservation improvements and insurance premiums? If so, can notice be sent after improvements are completed?
During the administrative redemption period and judicial redemption are preservation improvements required to be paid to redeem. Thanks for the great info!
Jared, I have great things about you throughout Mobile, AL. I am an agent at RE/MAX Realty Professionals. I attempted to help get the deal close with Damien in which I believe your company had a hand in. I wanted to know did you get this process figured out. It’s seems very complex and I am currently speaking with A. Evans Crowe, LLC, Attorney with trying to figure this process out.
@Denise Evans We now closed the deal through the lawyer's trust account. The closer of the office sent us a quit claim deed that we signed and got notarized. The same day she got it back she wired us the money. Slim process. Cost for the former owner $150. Our first deal closed, funds and profit back and ready to move on!
@Reto Winkler, good deal, confident you'll do even better on the next one.
@denise evans, I purchased several vacant parcels of land back in 2016. Once I received the certificates, I posted No Trespassing signs on the property. Are there any particular methods that can be done to show possession when it is vacant property?
@Michael Anderson, unless you can rent it out to someone who will use it virtually every day, such as a food truck, sno-cone business, car wash, used car lot, etc., you will have to file an ejectment lawsuit. It seems silly filing ejectment when the property is vacant, but ejectment does not just order someone off the property. It also ends any of their possessory rights and officially and legally puts you in possession. When we have a regular deed (not a tax deed) to property, the law considers us officially in possession at all times, whether we are physically there or not. The ejectment order does the same thing for you.
Than you @denise evans. Does that mean that the redemption period will not start until I file the ejectment?
@Michael Anderson, Most likely. Also, if you do not file ejectment or indisputably take exclusive and continuous possession within three years after the tax deed date, the taxpayer can get the property back and not pay you anything under the recent Rioprop decision.
Thanks @denise evans. I will get these files immediately. The neighbors did state that the previous owner has no interest in redemption. Thanks for your help.
A few months ago I bought 2 vacant lots that was delinquent in taxes in Alabama. The property needed a major clean up. Now that it’s cleaned up the person is coming back to redeem it, how do I get my money back that I paid for the clean up?
@Mek Siharath, Unless the property was in an urban renewal or urban redevelopment district (inside the official boundaries, as defined by local government) then I am afraid you cannot get your money back. I'm sorry.