Attorney William Hereford is a partner at the law firm Burr & Foreman, based in Birmingham, Alabama. He has been practicing Alabama tax sales law since the 1990s, and recently sat down for a podcast interview with Tax Sales Resources' CEO, Brian Seidensticker, to discuss how tax sales work in Alabama, a state which recently added tax liens sales to its investor offerings. Today there are two types of tax sales in Alabama, namely land sales and lien sales.
Alabama Land Sales
In a land sale, the county sells the delinquent taxpayer’s land to recoup its loss of that tax revenue. These are bid-up style sales, and if the parcels are overbid the overage is held by the county or, in some less common instances, given to the party that redeems the property. Once the purchase is finalized, the purchaser has an immediate right to possession – but must first file a “demand for possession.” (If no one bids, the state will purchase the parcel for the minimum and it is then considered a “sold to state” property.)
Alabama Lien Sales and How They Differ from Land Sales
With lien sales, which have only been conducted since 2019, the county sells its lien against the property that it acquired because the taxes weren’t paid. The bidding at tax lien sales starts at 12% simple interest per annum, and then is bid down. Whoever offers the lowest interest rate is issued a tax lien certificate upon payment. Oftentimes, the bidding goes all the way to zero. As of 2023, slightly less than half of the 67 counties in Alabama use the new lien sale system.
The Redemption Process in Alabama
Alabama’s timeframe for redemption is perhaps the longest of any state, because the right to redeem lasts at least three years.
Redemptions on the tax certificates can be made up until the point of final judgment. A purchaser of a tax sale certificate can file a lawsuit to remove the right to redeem any time after three years from the date of the sale and up 10 years beyond the date of the sale.
Possessing Tax Deed Properties in Alabama
The legal claim for seeking possession is called ejectment, and the certificate holder files the ejectment action or lawsuit in the county where the tax sale was conducted. A plaintiff bringing an ejectment action must prove that they had legal title to the land and were entitled to possession at the time of the commencement of the action, and that they continue to hold title until the time of trial. Most legal experts, including Hereford, interpret the law to say that if the court grants your ejectment request, then you don’t have to do a separate quiet title action in order to ensure a quiet title.
Learn More About the Alabama Tax Sale Process
Alabama’s multi-sale system and long redemption period – coupled with the fact that the interest on lien certificates can be bid to zero – can add unique challenges for would-be investors. But there is still the potential to make money investing in Alabama tax sales. To learn more, read Hereford’s extensive white paper – and check out his interview that delves into how Alabama’s Department of Revenue deals with properties that don’t sell at a land sale. For more information, listen to his complete, in-depth podcast interview with Brian Seidensticker about Alabama tax sales.
