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Tax Lien Foreclosure

Baumann, Doyle, Paytas & Bernstein, P.L.L.C. offers a full range of legal services concerning tax lien foreclosure actions.  Securing a tax lien against real estate for which the taxes remain unpaid is a high priority for investors. Because of this, in addition to the rate of return being between 16 and 18 percent interest, investing in most tax lien certificates can be rewarding and lucrative.

Judicial Foreclosure - The judicial process of foreclosure is now required for tax lien holders. Judicial foreclosure involves filing a lawsuit with the court to obtain a court order to foreclose.

The attorneys here have been involved with a form of Arizona real estate investment known as Certificates of Purchase (“CP”) or real property tax liens for the past twenty-four years.

Certificates of Purchase evidence liens placed upon real estate for non-payment of taxes. The liens are initially imposed by the county treasurer where the property is located. Liens are secured by the subject real property, and they cannot be eliminated by other foreclosure procedures such as trustee sales or judicial foreclosures. If the taxes remain unpaid for two years, then the county treasurer offers the lien or CP for sale to the public.

A CP is purchased from the County Treasurer by paying the total of the back taxes along with 16% on that amount plus approximately five to ten dollars in miscellaneous purchase fees. This is called an assignment to a private individual whether it is actually an individual or a legal entity.

If the actual landowner, as well as anyone else with an interest in the property, wishes to protect their interest in the subject property, they have the right to redeem the CP within the three (3) years immediately following the date the CP is originally offered for sale to the public. In this situation, the redeeming party is required to pay the amounts paid by the CP holder for the CP plus the percent of annual interest that was bid on that amount.

If the property is not redeemed within the three year period, a judicial foreclosure of the lien is permitted by Arizona statute. If the property is redeemed after the foreclosure proceeding is initiated and the redeeming party is served, the redeeming party still pays the back-taxeshus, the CP holder essentially pays nothing for the lawsuit and still gets his investment plus interest back.

If the property is not redeemed after the foreclosure proceeding is filed, then the CP holder obtains title to the property via a Treasurer Deed. Under these circumstances, the CP holder (now landowner) pays the costs and attorney’s fees which have been incurred.
Costs generally run $1,500.00 to $3,000.00, which include the costs of litigation guarantees, filing fees, recording fees, investigation services, service of process and publication in some cases. Attorney’s fees are negotiated on a client-by-client basis depending upon the number of foreclosures anticipated. Our normal fees range from $1,250.00 to $3,500.00 per foreclosure action that results in a deed, with lower rates for high volume clients.

The only risks that we have been able to ascertain after twenty-four years of experience in this area of law are (1) that the property value is less than total cost of back taxes and the costs of obtaining a deed, (2) a bankruptcy proceeding by a party with an interest in the property, and (3) another interest presents after filing the lawsuit and is not named or served and ultimately redeems the back taxes. The former can be minimized by judicious selection of the parcels purchased, and the latter is more of a risk to the attorneys as the debt for the costs and attorneys fees is generally the one that is discharged.

In reference to our experience in this area, we have been doing this type of work for the last twenty-four years. We represent some of the largest investors in the state, some of whom have invested millions of dollars. They come to us from all over the country, and include doctors, lawyers, engineers and real estate specialists as well as other professionals.

We would like to thank you for reviewing the above and invite you to call us if you would like to talk about the opportunities discussed above. We would be happy to answer any questions you have or provide you with any additional information you deem necessary.


FREQUENTLY ASKED QUESTIONS ABOUT TAX LIENS

Question:  When are property taxes in Arizona due?
Answer:  Property taxes are billed in September and are payable in two installments. The first installment is due on October 1, delinquent after November 1, and the second installment is due on March 1 of the next calendar year, delinquent after May 1st.

Question:  What happens when property taxes become delinquent?
Answer:  Delinquent property taxes accrue interest at an annual rate of 16% simple interest prorated monthly. In addition, when a property tax lien is listed for sale there are advertising fees ($5.00 or 5% whichever is greater) plus sale fees.

Question:  Where can I get a list of delinquent taxes?
Answer:  Contact the County Treasurer for a list of delinquent taxes.

Question:  What are tax lien certificates?
Answer:  They are a first lien on the real estate. Buyers are provided a listing of all certificates purchased.

Question:  How does someone acquire a tax lien certificate?
Answer:  At the public auction conducted each February. The auction is called a Tax Lien Certificate Sale.

Question:  When is the Tax Sale and where will the sale be held?
Answer:  Contact the County Treasurer for specific dates and places each year.

Question:  Who may participate in the Tax Certificate Sale?
Answer:  Anyone. To participate in the sale a bidder must register with the Treasurer’s office. A person must visit the office and complete a Bidder Information card. The Office requires your legal name, the name of a contact person, a valid mailing address, current phone number, email address, and Tax ID number.

Question:  Will your office research parcel information for me?
Answer:  No, the tax lien holder is responsible for their own due diligence.  We recommend you utilize Parcel Inquiry through the County Treasurer’s web page or Assessor’s web page for parcel information.

Question:  Where may I obtain copies of the Arizona Revised Statutes that pertain to the tax liens?
Answer:  Statutes are available online (Title 42, Chapter 18, beginning with Article 3) http://www.azleg.state.az.us/ArizonaRevisedStatutes.asp?Title=25

Question:  How does the holder of the certificate receive the interest income?
Answer:  The Treasurer remits the principal (face amount of certificate) and the interest earnings if the property taxes are paid by the owner or an agent.

Question:  Can interest rates be changed after the bid?
Answer:  If a certificate should be cancelled or reduced, the interest earned will be 10% per year, simple interest or the rate of interest bid at the tax certificate sale, whichever is less on the cancelled or reduced amount. Bankruptcy rulings may also affect interest rates.

Question:  Why would a certificate be cancelled or reduced?
Answer:  To correct errors, omissions, or double assessments and when ordered by a court.

Question:  Are tax sale certificates transferable?
Answer:  Certificates may be transferred by completing an endorsement form and paying the applicable fee prior to redemption.

Question:  What about tax certificates issued to the state?
Answer:  State held tax certificates, may be acquired by individuals after the close of the tax sale. The Treasurer’s Office will announce the date(s) these certificates become available on the main page of our website.

Question:  What is the life of a tax certificate?
Answer:  Certificates are dated as of the date the purchase was made. Ten years later, if the purchaser has taken no additional action to foreclose the tax lien, the lien expires and is voided. No payments will be made to the purchaser. A purchaser may initiate a Judicial Foreclosure action after three years from the initial purchase date.

Question:  What is the tax deed process?
Answer:  Any certificate holder including the County may file an Action to Foreclose in the Superior Court Maricopa County three years from the date of the sale.

Question:  How do we find out what tax liens were not purchased?
Answer:  The STATE CP REPORT will be available for public viewing in our customer service area or you can purchase a CD containing this list for $50.00 after the sale.

Question:  How are we notified when liens have been redeemed?
Answer:  You should receive a Monthly Activity Statement from the County Treasurer’s office on the third business day of each month and to ONLY those buyers that have activity in that month. For those paperless buyers, the Treasurer’s Office usually processes the refund check the same day or following business day.  Contact the County Treasurer directly for more specific information.

Question:  Who can redeem a tax lien?
Answer:  The owner of the property or any other person or entity that has an interest in the property can redeem prior to the issuance of the Treasurer’s Deed?

Question:  How long does a tax lien foreclosure take?
Answer:  The foreclosure process can take anywhere from three months to two years to complete.  It all depends on the specific details of the parcel. Some things that effect the duration include number of interested parties, whether we are able to locate the parties and the time parameters of the court.

Question:  How much will a tax lien foreclosure cost?
Answer:  The cost to foreclose varies with each parcel.  There are specific amounts that are set, i.e. filing fees, recording fees and Deed fees; however, service of process fees and publication fees vary.  In a simple, one owner case, costs typically are estimated to be around $1,000.00.  Attorney’s fees vary according to time spent on each case.  In a routine, non-complicated lawsuit, attorney’s fees are estimated to be around $2,500.00.

Question:  How can I initiate foreclosure on my tax liens?
Answer:  Contact Carolyn at (cmurphy@bdpblaw.com).
       
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Baumann, Doyle, Paytas & Bernstein, P.L.L.C.     2929 N. 44th Street      Suite 120     Phoenix, AZ 85018-7239     Phone (602)952-8500       Fax (602)667-6552

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