Question about Alabama tax lien certificates--take possession?

[Latreeka Williams]

Hello,

I recently purchased a tax lien certificate in Alabama (property was sold at the 2015 tax sale). The property does include a house. I had a few questions about my rights as a lien holder. I have been reading/researching online and have come across different things regarding what you can and can not do with a certificate. For example many sites and "gurus" are stating I CAN'T do anything until I get a tax deed. I am ok with waiting on the tax deed because the house is in a fairly decent neighborhood and with a little bit of rehab I do believe it will be a good investment.

I read on this site where I CAN take possession and actually rent out the property!

How do you actually take possession with a tax certificate?

[Denise Evans]

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.)