Real Estate Law | July 2015
Foreclosure of Tax Liens: An Underutilized Tool for Arizona Real Estate Investment
The Maricopa County Central Court Complex in
Tax liens on property in the Phoenix area and throughout Arizona offer the potential for guaranteed return and
a low-risk windfall for investors who understand the legal requirements.
investors looking to expand their portfolio with real estate,
Arizona has long been an ideal target. The purchase of
residential or commercial property is the most common type of
real estate investment activity, but investors should also be
aware of a third, less risky option: the purchase of tax lien
certificates from the county treasurer.
offer guaranteed returns and a potential for windfall for the
investor who is successful in purchasing them.
More about our
Tax Lien Foreclosure services
Background. Every year, Arizona’s county treasurers sell tax
lien certificates at a public auction for all properties in
which the property taxes are two years delinquent.
A potential investor bids an interest rate (from 0% to 16%), and
the investor bidding the lowest rate wins the certificate.
For the next
three years after the sale, the property owner can redeem the
certificate from the investor by paying the past-due taxes plus
the interest rate that was bid.
If, by the end of the three-year period, that redemption does
not occur, the investor can foreclose the property and receive
the windfall of obtaining the property for a small percentage of
While this sounds like a straightforward and easy process, its
procedural aspects can easily trip up the investor and
potentially ruin the investment. Consider this partial list of
issues that can arise:
statutes provide a very rigid system for calculating the time
periods during which the foreclosure may be filed.
If you (the investor) fail to provide a required notice, wait
too long to do so, or otherwise file the action too early, the
Courts can and will reject your claim.
locate and provide notice to all interested parties. If you fail
to locate any interested party, the foreclosure can be set
aside, or you may obtain the property subject to the interest of
that party (which, if it is a mortgage, can be financially
statutes mandate that you include certain language in the
statutory notice provided to interested parties. Failure to
include that language can bar you from filing the foreclosure
The foreclosure action must include an accurate legal description of
the subject property. Simply relying on the prior deed will not
suffice. Failure to obtain the proper legal description can
result in your recording an improper deed, potentially exposing
you to legal liability under
A.R.S. § 33-420.
Even if you
properly follow all procedures, you will still need to navigate
through the Court system. The specific language required by the
Court in order to issue the Judgment varies from county to
county. If that language is not included, the Court will not
issue the Judgment, in which case the Treasurer will not issue
the deed to you.
minimize the risks of these pitfalls and enhance the success of
the foreclosure by using an experienced attorney who is familiar
with the local requirements governing tax lien foreclosure. The
cost of hiring such an attorney can be justified by the likely
outcomes of the transaction:
you will end up with the property via the foreclosure, obtaining
the property at a fraction of its value; or
you will redeem the tax lien certificate, and the Court will
force the property owner to reimburse you for the attorneys’
fees and costs you incurred.
nutshell, properly pursuing the purchase of Arizona property tax
liens is a relatively risk-free opportunity that can generate
significant returns and that many investors overlook as part of
their real estate strategy.