What Happens If I Don't Pay Property Taxes in Alabama?

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.

How Property Taxes Work

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.

How Tax Sales Generally Work

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.

How Does Alabama Handle Tax Non-Payment?

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.

Notice Before the Probate Court Proceeding

Ten days before the probate court proceeding, the tax collector must serve you with a notice by:

• personally handing you (or your agent) a copy of the notice
• leaving a copy of the notice at your residence or place of business, or
• mailing you a copy of the notice by certified or registered mail. (Ala. Code §§ 40-10-4, 40-10-11).

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).

Notice Before the Tax Lien Sale

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:

• publishing a notice in a newspaper for three weeks or
• posting a notice at the county courthouse and in a public place for at least three weeks. (Ala. Code § 40-10-12).

Your Right to Appeal the Probate Court Decision

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).

What Happens After a Tax Lien Sale?

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).

What Happens If No One Buys the Lien at the Sale?

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.

Who Gets Possession of the Home After a Tax Lien Sale

The holder of the certificate of sale is entitled to possession of the home.

When the State Gets 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).

When Another Purchaser—Other Than the State—Gets Possession of the Home

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).

Can I Redeem My Home After an Alabama Tax Lien Sale?

Many states allow delinquent taxpayers to pay off the amounts owed and keep the home. This process is called "redeeming" the property.

How Long Is the Redemption Period After an Alabama Tax Lien Sale?

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.

How Much Does It Cost to Redeem a Property After an Alabama Tax Lien Sale?

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).

What Options Do I Have If I Can't Afford to Pay My Property Taxes in Alabama?

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:

• find out if you meet the criteria for a property tax abatement, or
• request a change in the property's assessment if you feel your assessed property value doesn't reflect the fair market value.

Getting Help

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.