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If you don't pay the real property taxes on your Alabama home, the county treasurer can hold a tax lien sale and sell a tax lien certificate to the highest bidder. And you could eventually lose ownership of the property. But the winning bidder from the sale can't get ownership of your Alabama home immediately. You'll get time to catch up on the overdue amounts before this happens. You'll most likely lose the property permanently, however, if you don't pay off the tax debt during a "redemption period" after the sale.
People who own real property have to pay property taxes. The government uses the money that these taxes generate to pay for schools, public services, libraries, roads, parks, and the like. Typically, the tax amount is based on a property's assessed value.
If you have a mortgage on your home, the loan servicer might collect money from you as part of the monthly mortgage payment to later pay the property taxes. The servicer pays the taxes on the homeowner's behalf through an escrow account. But if the taxes aren't collected and paid through this kind of account, the homeowner must pay them directly to the taxing authority.
When homeowners don't pay their property taxes, the overdue amount becomes a lien on the property. A lien effectively makes the property act as collateral for the debt. All states have laws that allow the local government to sell a home through a tax sale process to collect delinquent taxes.
In a tax lien sale, the taxing authority sells the tax lien, and the purchaser gets the right to collect the debt along with penalties and interest. If the delinquent amounts aren't paid, the purchaser can typically foreclose or follow other procedures to convert the certificate to a deed.
In some jurisdictions, though, a sale isn't held. Instead, the taxing authority executes its lien by taking title to the home. State law then generally provides a procedure for the taxing authority to dispose of the property, usually by selling it.
In other jurisdictions, the taxing authority uses a foreclosure process before holding a sale or the tax collector sells the property itself.
In Alabama, taxes are due on October 1 and become delinquent on January 1. (Ala. Code § 40-1-3). Again, if you don't pay your property taxes in Alabama, the delinquent amount becomes a lien on your home.
Once a tax lien is on your home, the taxing authority may hold a tax lien sale. Then, if you don't pay off the amount of the lien plus various other amounts in a specified amount of time, the winning bidder can get title to your home.
Before the sale, the tax collector must get a court decree from the probate court authorizing a sale. (Ala. Code § 40-10-1). The tax collector has to provide two notices, one before and one after this court proceeding.
Ten days before the probate court proceeding, the tax collector must serve you with a notice by:
If the tax collector can't get notice to you in any of these ways, it can publish the notice in a newspaper or post it at the county courthouse. (Ala. Code § 40-10-4).
This notice will tell you to show up at the hearing and demonstrate, if you can, why the court shouldn't allow the tax lien sale. (Ala. Code § 40-10-4).
If the court authorizes the sale, the tax collector must give notice of the sale, including the time of sale, 30 days before the sale by:
You have 30 days after the court authorizes the sale to appeal the decision to the county circuit court. If you lose the case, the costs of fighting the appeal get added to the tax lien. (Ala. Code § 40-10-25).
The high bidder at the tax lien sale doesn't immediately get title to the property. Instead, the buyer receives a tax lien certificate. But first, the court must confirm the sale.
Within ten days after the sale, the tax collector files a report with the probate court asking it to confirm the sale. You have five days to object to the report. If the court doesn't agree with your objections and finds that the tax collector followed the correct legal procedures in the sale, it will confirm the sale. The tax collector will then give the high bidder a "certificate of purchase." (Ala. Code § 40-10-13).
Generally, after owning a tax certificate for three years, the purchaser can get a tax deed (that is, the purchaser can get ownership of the home). Or, if the state is the purchaser, it may then sell the home after three years elapse from the sale date, and that purchaser will get a tax deed. (Ala. Code § 40-10-29, Ala. Code § 40-10-132).
Land Commissioner May Foreclose Instead
If you fall behind in your property taxes, you might face a tax foreclosure instead of a tax lien sale. Here's how the tax foreclosure process works: The Land Commissioner (the official that has control over all property acquired by the state through tax sales and tax foreclosures) may declare the delinquent tax amounts due and payable and file a foreclosure lawsuit on behalf of Alabama. The court will determine the total amount you owe, enter a judgment, and order the home sold at a tax foreclosure sale. If no one bids a sufficient amount for the home at the sale—that is, no one bids enough to cover the full amount of the foreclosure judgment—the state of Alabama gets a deed to the home. (Ala. Code § 40-10-141).
In some cases, any tax liens remaining unsold after a tax lien sale will be included in future tax lien auctions or sales until they're sold.
The holder of the certificate of sale is entitled to possession of the home.
If the State of Alabama is the high bidder at the sale, it's entitled to possession of the home as soon as the judge signs the certificate of sale. The state must first demand possession of the property from you. If you don't move out within six months after the sale date, the state can start an eviction action. (Ala. Code § 40-10-73).
If someone else is the high bidder at the sale, that party is entitled to possession of the property after receiving the certificate from the tax collector. To get possession, the purchaser must first make a demand that you give up the home. If you don't move out within six months of the demand, that party can start an eviction action against you. (Ala. Code § 40-10-74).
Look Out for Legal Changes
In this article, you'll find details on property tax sale laws in Alabama, with citations to statutes so you can learn more. Statutes change, so checking them is always a good idea.
How courts and agencies interpret and apply the law can also change. And some rules can even vary within a state. These are just some of the reasons to consider consulting an attorney if you're facing a tax sale.
Many states allow delinquent taxpayers to pay off the amounts owed and keep the home. This process is called "redeeming" the property.
In Alabama, if the state buys the tax lien, the property may be redeemed at any time before the title passes out of the state. If another party buys the lien, you may redeem the property at any time within three years from the date of the sale. (Ala. Code § 40-10-120, § 40-10-29, Ala. Code § 40-10-132).
Under Alabama law, if you occupy the property, you might be able to redeem even after the redemption period expires, though you'll probably have to ask a court to approve the redemption. (Ala. Code § 40-10-82). Talk to a lawyer to learn more about the laws that cover possession of the property following a tax lien sale and the effect they might have on your redemption rights.
The amount you'll have to pay to redeem depends on who buys the lien at the sale—the state or another party. Generally, you'll have to pay the amount the purchaser paid at the sale, interest, any additional taxes that become due, and costs and fees. (Ala. Code § 40-10-122, Ala. Code § 40-10-121).
Even though you'll get a redemption period after an Alabama tax lien sale, in most cases, it's better to take action before you become delinquent on your taxes to make them more affordable. You could, for example:
If you're already facing a property tax lien sale in Alabama and have questions (or need help redeeming your property after a tax lien sale), consider talking to a foreclosure lawyer, tax lawyer, or real estate lawyer.