Question about Alabama tax lien certificates--take possession?
Montgomery, AL · Member since 2016 · 8 posts · 5 votes
Question about Alabama tax lien certificates--take possession?
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JD, CCIM , Real Estate Broker · Tuscaloosa, AL · Member since 2014 · 1k+ posts · 1k+ votes
10yHi @Latreeka Williams. Sorry for the delay. There has been some illness in my family, and I was away from my computer. Under Alabama Code Section 40-10-74 (reprinted at end) you are entitled to possession as soon as you receive the tax certificate. You do not have to wait until you have a tax deed. There is much mis-information on this topic. Thank you @Roy Oliphant for recommending me.
If the property is obviously abandoned, you can change the locks and immediately start making your repairs. If the property contains a residential structure, and the owner redeems, they will have to pay you for the value of your repairs, in addition to the taxes and interest. They will also have to pay you for your casualty insurance premiums, plus interest. You can buy up to $25,000 worth of casualty insurance from Jack Eyer, at Eyer Insurance in Birmingham, Alabama. BP will not let me provide his phone number, but you can do an Internet search and find him.
Somebody told me that State Farm will write regular insurance, with no limits, on a tax certificate. I do not know if that is true or not.
You can rent the property out. If the owner redeems, you will be able to keep all the rents earned before redemption.
If the someone is living in the property, or it is just temporarily vacant between tenants or something, you cannot just barge in and take over. You will have to give the owner written notice to vacate. You will then have to wait 6 months before you will be able to file a ejectment lawsuit to get them out.
If you file your ejectment lawsuit, and THEN the owner redeems, they will also have to pay your legal fees for the lawsuit.
Please search Bigger Pockets for blog posts and forum articles I've written about Alabama tax sales. It is a complicated field to try to figure out on your own.
Here is the statute:
Section 40-10-74 Right of purchaser or assignee to possession; redemption when lien is recorded.Any purchaser of lands at a tax sale other than the state or anyone claiming under him shall be entitled to possession of said lands immediately upon receipt of certificate of sale from the tax collector; and, if possession is not surrendered within six months after demand therefor is made by said purchaser or his assignee, the said purchaser or his assignee may maintain an action in ejectment or a statutory real action in the nature of ejectment, or other proper remedy for the recovery of the possession of the lands purchased at such sales and shall be entitled to hold the possession thereof on recovery, subject, however, to all rights of redemption provided for in this title. If the mortgage or other instrument creating a lien under which a party seeks to redeem is duly recorded at the time of said tax sale, the said party shall, in addition to the time in this title specified, have the right to redeem said real estate sold, or any portion thereof covered by his mortgage or lien, at any time within one year from the date of written notice from the purchaser of his purchase of said lands at tax sale, served upon such party, and notice served upon either the original mortgagees or lienholders or their transferee of record, or their heirs, personal representatives or assigns shall be sufficient notice. Such notice shall be given by certified or registered mail, return receipt demanded, addressed to the last known address of the mortgagee or lienholder. Nothing in this title shall affect the rights of minors or insane persons to redeem as provided for in this title, or operate to convey or affect the rights, title or interest of any reversioner or remainderman.
(Acts 1935, No. 194, p. 256; Acts 1935, No. 528, p. 1114; Code 1940, T. 51, §287.)26 Replies
- 10yJohn UnderwoodPro MemberInvestor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
I beleive that there is a 3 year redemption period for Alabama and they can sell a new lien for each of these 3 years. I am sure you can't go on property until you have a deed in hand.
- Rockwall, TX · Member since 2014 · 380 posts · 211 votes10y
@Denise Evans is the expert here for Alabama. Hope she will jump in.
Where you stand depends on whether the house is vacant or not. Alabama is special in that the holding the lien does entitle you to 'rents'. Taking possession is a different question and will usually involve significant legal process if the property is occupied.
Getting a tax deed on a property that was sold in the 2015 sale will take a while as the lien must mature for at least three years before a deed can be issued.
- Montgomery, AL · Member since 2016 · 8 posts · 5 votes10y
Thank you for the info. It does appear the house is vacant. We did a walk thru (the back door was broken into) and there are no furnishings or anything like that.
- JD, CCIM , Real Estate Broker · Tuscaloosa, AL · Member since 2014 · 1k+ posts · 1k+ votes10y
Hi @Latreeka Williams. Sorry for the delay. There has been some illness in my family, and I was away from my computer. Under Alabama Code Section 40-10-74 (reprinted at end) you are entitled to possession as soon as you receive the tax certificate. You do not have to wait until you have a tax deed. There is much mis-information on this topic. Thank you @Roy Oliphant for recommending me.
If the property is obviously abandoned, you can change the locks and immediately start making your repairs. If the property contains a residential structure, and the owner redeems, they will have to pay you for the value of your repairs, in addition to the taxes and interest. They will also have to pay you for your casualty insurance premiums, plus interest. You can buy up to $25,000 worth of casualty insurance from Jack Eyer, at Eyer Insurance in Birmingham, Alabama. BP will not let me provide his phone number, but you can do an Internet search and find him.
Somebody told me that State Farm will write regular insurance, with no limits, on a tax certificate. I do not know if that is true or not.
You can rent the property out. If the owner redeems, you will be able to keep all the rents earned before redemption.
If the someone is living in the property, or it is just temporarily vacant between tenants or something, you cannot just barge in and take over. You will have to give the owner written notice to vacate. You will then have to wait 6 months before you will be able to file a ejectment lawsuit to get them out.
If you file your ejectment lawsuit, and THEN the owner redeems, they will also have to pay your legal fees for the lawsuit.
Please search Bigger Pockets for blog posts and forum articles I've written about Alabama tax sales. It is a complicated field to try to figure out on your own.
Here is the statute:
Section 40-10-74 Right of purchaser or assignee to possession; redemption when lien is recorded.Any purchaser of lands at a tax sale other than the state or anyone claiming under him shall be entitled to possession of said lands immediately upon receipt of certificate of sale from the tax collector; and, if possession is not surrendered within six months after demand therefor is made by said purchaser or his assignee, the said purchaser or his assignee may maintain an action in ejectment or a statutory real action in the nature of ejectment, or other proper remedy for the recovery of the possession of the lands purchased at such sales and shall be entitled to hold the possession thereof on recovery, subject, however, to all rights of redemption provided for in this title. If the mortgage or other instrument creating a lien under which a party seeks to redeem is duly recorded at the time of said tax sale, the said party shall, in addition to the time in this title specified, have the right to redeem said real estate sold, or any portion thereof covered by his mortgage or lien, at any time within one year from the date of written notice from the purchaser of his purchase of said lands at tax sale, served upon such party, and notice served upon either the original mortgagees or lienholders or their transferee of record, or their heirs, personal representatives or assigns shall be sufficient notice. Such notice shall be given by certified or registered mail, return receipt demanded, addressed to the last known address of the mortgagee or lienholder. Nothing in this title shall affect the rights of minors or insane persons to redeem as provided for in this title, or operate to convey or affect the rights, title or interest of any reversioner or remainderman.
(Acts 1935, No. 194, p. 256; Acts 1935, No. 528, p. 1114; Code 1940, T. 51, §287.) - Montgomery, AL · Member since 2016 · 8 posts · 5 votes10y
Thank you for the info! I hope your family is doing better. I have been reading this weekend and found so much helpful info on this website. I have been researching who the owner of the property is...it's an out of state LLC listed as the owner on the tax certificate. I am assuming that is who I should contact regarding the notice to vacate?? Can you prepare your own notice or must it be done by a lawyer?
I am going to contact State Farm tommorrow to ask about the insurance and will post an update.
- Investor · Birmingham, AL · Member since 2016 · 446 posts · 305 votes9y
How does possession work with apartments that has tenants in place? Do I just send notice, "hey im the new landlord, you pay me now"?
If there is a property management company in place do you serve them with any kind of notice (hey, your services are no longer needed, scram).
- Dothan, AL · Member since 2012 · 36 posts · 2 votes9y
How did the state farm insurance request go?
- Sandy Springs, GA · Member since 2017 · 17 posts · 6 votes9y
@Latreeka Williams - Hi. I was hoping you could come back and just provide an update for those of us that are new here. Thanks in advance.
- Investor · Opelika, AL · Member since 2015 · 108 posts · 15 votes8y
What counts as ”giving the owner written notice to vacate”? How does one go about doing this with or without a lawyer?
- Investor · Opelika, AL · Member since 2015 · 108 posts · 15 votes8y
Was State Farm able to insure your Tax Cert?
- Montgomery, AL · Member since 2016 · 8 posts · 5 votes8y
Hello,
No State Farm was not able to provide insurance. So far nothing has happened to the property and we should be able to get the Tax Deed in a few months!
- Mc Calla, AL · Member since 2017 · 42 posts · 8 votes8y
I don't know if this information will help or not. I have a tax certificate for a property and I contacted Alfa insurance company and was able to cover the new property with a 1 million dollar umbrella policy for $185 per year. I'm not sure if State farm would do the same but it worked out well for me with Alfa.
- Montgomery, AL · Member since 2016 · 8 posts · 5 votes8y
Thanks for the update! I will reach out to Alfa this week.
- Member since 2019 · 8 posts · 0 votes7y
@Denise Evans, I am new to all of this tax sale, certificate, deed thingy. I just purchased 3 apartment buildings through a tax sale today. All 3 have 5 units each. Each unit has 1-2 tenants in them. I should get my tax certificate in a few days.
My question is how do I go about taking possession of these properties?
Do I send the tenants a letter informing them that I am the owner now?
Will that alert the previous owner that they didn't pay their taxes (now they will know and redeem)?
Do I get a locksmith out and change all the locks?
Do I fix us the empty apartments and start renting them out?
What is the tenants are on section 8 or some other government assisted housing, how do I go about getting those funds sent to me?
- JD, CCIM , Real Estate Broker · Tuscaloosa, AL · Member since 2014 · 1k+ posts · 1k+ votes7y
@Mary Taylor, You do not contact the tenants, because the owner will sue you for interfering with his contractual relationships with his tenants. You cannot go on the premises and change locks or start doing work. The property is not abandoned.
You must send a letter to the owner demanding it surrender possession to you and allow you to enter into new lease agreements with the tenants, or sign a master lease with you which allows him to sublease to the tenants. There is no time limit for when you send the letter during the first three years after the auction. Whenever you do, if he does not redeem within 6 months after that, you can sue him and the tenants for ejectment. If he redeems during the ejectment lawsuit, he will also have to pay your legal fees.
It is HIGHLY unlikely the owner will not redeem. You just bought yourself some redemption income, that's all.
- Real Estate Agent · dallas, GA · Member since 2017 · 19 posts · 6 votes7y
@Denise Evans Hello I am new to tax lien cert/deed investing in Alabama and I was wondering if a tax deed property (one not likely to redeem) can be rented to section 8 tenants ? I called the housing authority and they just said you have to prove you have ownership interest. Technically a tax deed is ownership interest and now that I see tax deed in Alabama can be insured it seems that this would be feasible. To your knowledge is this possible?
- JD, CCIM , Real Estate Broker · Tuscaloosa, AL · Member since 2014 · 1k+ posts · 1k+ votes7y
@Karonisha Coleman, I've spoken to the Section 8 people in Mobile and in Birmingham. I think their attitude is representative of everybody else, but that's not for sure. You might want to check other cities, if relevant. In Birmingham and Mobile, they say that unless you have quieted title to your tax sale property, or gained a quitclaim deed from the former owner(s) or heirs, the property is in danger of being redeemed. The probability might be low, but it could happen. They do not want to put a family in a tax deed property under Section 8, and then have the property redeemed and the family has to leave. It is very disruptive to a family, AND there might not be another available Section 8 rental for them to move into. That would be catastrophic. So, the simple solution is no Section 8 approvals for any property that has outstanding redemption rights. While I know this limits the number of available tenants for investors, I have to agree with their reasoning.
- Real Estate Agent · dallas, GA · Member since 2017 · 19 posts · 6 votes7y
I figured as such but because the laws are a little different I had to check. Thanks for confirming.
- Member since 2019 · 1 post · 0 votes7y
Hi @Denise Evans I had a question myself. I just bought a tax Lein in Pike County AL and it’s a small restaurant and lot beside it. It’s been abandoned and not in use now. There is trash all inside etc so it needs to be cleaned up just to keep it from getting nastier and attracting more rats, bugs, etc. Would I be able to change the locks and take over when I get my tax certificate? How is the best way to do that? Also, is it possible and in my best interest to fix it up a little bit where it’s either rentable for people to rent it as a business or create a business myself in it? Is that legal? I didn’t know how different it is for retail lots instead of residential. Since I just bought the tax Lein I know it will be 3 years before I could get the deed. Just need some advice. I don’t want to do anything illegal and want to make sure I am doing the best with the investment! Thank you!
- JD, CCIM , Real Estate Broker · Tuscaloosa, AL · Member since 2014 · 1k+ posts · 1k+ votes7y
The property must be abandoned for DIY possession, otherwise you must file an ejectment lawsuit. Property that is vacant and seriously neglected is not always legally abandoned. Proceed with caution.
- Member since 2019 · 1 post · 0 votes7y
I’m too new to the tax sales. I purchased a certificate from the state and have a question about my rights to access the property. The property is listed as a vacant 1 acre parcel but there is a old dwelling on property. It’s clearly vacant and no utilities are on. (Verified) However there is junk all on the outside (trash, old furniture etc) what would be my right to go overall clean up all this debris. Clearly it’s important to me because it’s the neighboring house.
- Montgomery AL · Member since 2019 · 126 posts · 23 votes6y
@Denise Evans following up on your comment re: someone living on the property... it is still unclear to me on the timing or process to make preservation improvements before the redemption.
scenario: send notice to vacate upon issued tax certificate and wait 6 months for response before filing ejectment. Can I make preservation improvements during the 6 month waiting period and if so how do you go about it where it is not disruptive to the owner or tenant... Given these improvements are ‘physical’ /labor intense improvements?
or do you wait until after the 6 month waiting period to get a judgement from the ejectment suit and then have free will to make improvements... whether they are physical or simply paying weed liens, or termite treatments?
I’m thinking the 6 month waiting period can give taxpayer time to redeem if my goal is to increase the redemption fees via pres. improvements Or waiting 6 months to make an improvement might allow/cause damage to fester. - Montgomery AL · Member since 2019 · 126 posts · 23 votes6y
Originally posted by @Denise Evans:
@Mary Taylor, You do not contact the tenants, because the owner will sue you for interfering with his contractual relationships with his tenants. You cannot go on the premises and change locks or start doing work. The property is not abandoned.
You must send a letter to the owner demanding it surrender possession to you and allow you to enter into new lease agreements with the tenants, or sign a master lease with you which allows him to sublease to the tenants. There is no time limit for when you send the letter during the first three years after the auction. Whenever you do, if he does not redeem within 6 months after that, you can sue him and the tenants for ejectment. If he redeems during the ejectment lawsuit, he will also have to pay your legal fees.
It is HIGHLY unlikely the owner will not redeem. You just bought yourself some redemption income, that's all.
@Denise Evans I think I got my answer to the long post I just addressed to you re: doing work before an ejectment judgement when the prop is occupied either by owner or tenant.
You clearly stated you cannot start doing work... my bad on the oversight. - Member since 2019 · 1 post · 0 votes6y
Question, I purchased a tax certificate and went to have the property assessed ..is it typical for your name to appear as the owner of the property on the deed after that , it now shows like this online OWNER -JOHN DOE 2018 TAX SALE...I found this odd as it's just a tax certificate at the moment
- Investor · Mobile, AL · Member since 2016 · 71 posts · 16 votes3y
@Denise Evans not my situation, but have you seen this before-never thought you can charge 12% interest for each individual item.
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