What Are Ad Valorem Taxes?
In Alabama, real property (or real estate) is typically subject to annual ad valorem taxes assessed by state, county, and local municipal governments. The county tax assessor assesses the real property taxes on October 1 of each year, and those amounts are paid to the county tax collector by December 31 annually.
The Cost of Delinquent Real Property Taxes
If an owner of the property is delinquent in paying annual real estate taxes, then that property will be subject to a tax lien auction in the following year. In Jefferson County, Alabama, this auction typically occurs on the first Monday in May. The date varies between counties. Under the Alabama Statutory Code, the county tax collector is authorized to secure payment of delinquent taxes through a tax lien auction in which a perpetual first lien, pursuant to Alabama Code Section 40-1-3, is sold and transferred to a tax purchaser in order to recover any taxes assessed and levied against the property, along with applicable interest, penalties, fees and costs. The tax lien for each property is auctioned off to a tax purchaser. If there is no tax purchaser, then the county holds the tax lien. A tax lien certificate is then issued to the tax purchaser for the first three years after the tax lien auction.
Two Types of Real Property Redemption
1. Administrative Redemption – if the redemption is within 3 years after the tax lien auction
It is much simpler to redeem, or recover, the real property within three years of the tax lien auction. An owner may directly redeem their property and extinguish the tax lien by paying to the local county all taxes, interest, fees, and penalties covering the property. Once the county processes the redemption, a certificate of redemption is issued to the owner and the first priority tax lien on the property is extinguished.
2. Judicial Redemption – if the redemption is more than 3 years after the tax lien auction
If the property has not been redeemed through administrative redemption within three years of the tax auction, then the tax lien purchaser will obtain a tax deed from the county probate court. The tax deed vests in the tax purchaser all the right, title, interest, and estate of the person whose duty it was to pay the taxes on such real estate (i.e., the owner). Delivery of a tax deed to the tax purchaser extinguishes the owner’s “legal title” in the property. At this time, the owner loses the right of administrative redemption, but the owner may redeem the property through judicial redemption.
Judicial redemption requires the filing of a lawsuit against the tax purchaser and the payment of specified sums into the court. Alternatively, the owner and tax purchaser may negotiate an amount by which the tax purchaser is willing to transfer its interest in the property back to the owner, thus extinguishing any interest created by the tax deed.
We’re here in town and ready to help.
If you have questions about your real property taxes or redemption options, give our MSN attorneys a call. Our real estate practice spans transactions, land development, and corporate and construction services, and our firm offers a full suite of legal services encompassing business law, family law, estate planning, personal injury, and government representation.