Home>What are “Real Property Tax Liens”?

What are “Real Property Tax Liens”?

July 12, 2022

By Diane Drain Attorney & Retired Law Professor

When people fail to pay real property taxes on their homes, vacant land, and/or commercial buildings, Arizona law allows county governments to lien the real property for the unpaid taxes, effectively putting a mortgage on the property to pay the unpaid taxes. If the taxes are not paid within three years, the counties will sell the tax lien to investors at auction.

Arizona specifically, allows investors to purchase unpaid real property taxes from counties in the form of tax lien certificates on real property as an investment. Each year, counties hold auctions to sell unpaid property tax liens. Maricopa County, for example, holds its annual online auction in February. Some counties may have unsold tax lien certificates that they sell in addition to the auction.

An investor bids on the interest rate on the tax lien in the auction. According to Arizona law, an investor can earn up to 16 percent interest per year on a tax lien certificate. The bidder with the lowest interest rate bid wins the auction for each lien. If you are the successful bidder, you must pay the back taxes and obtain a tax lien certificate.

To redeem the tax lien certificate, the property owner must pay the taxes plus the 16 percent interest. The investor receives his investment plus the interest rate he bid at the auction, and the county receives the balance interest. If the property owner does not redeem the tax lien certificate within three years after purchase, the investor has the right to foreclose on the tax lien certificate by initiating a judicial foreclosure complaint.

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By |Published On: July 12th, 2022|Last Updated: July 30th, 2022|

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