Alabama Tax Liens - What Happens After First Year Lien Purchase?

Alabama Tax Liens - What Happens After First Year Lien Purchase?

JD, CCIM , Real Estate Broker · Tuscaloosa, AL · Member since 2014 · 1k+ posts · 1k+ votes

Here's an example of Alabama law change a couple of years ago. It was designed to avoid "lien fracturing" where different investors own different years tax liens on the same property.  Because the law says you must own ALL of the tax liens before you can foreclose, it meant that nobody could foreclose when lien fracturing occurred. Now, here is an example of what happens after the problem was fixed by a statute change:


Amy bought the 2024 tax lien on Mark’s house at the 2025 auction, with a winning bid of a 6% redemption interest rate. The taxes were exactly $1,000.

Now Amy has a right of first refusal to buy the 2025 lien at the 2026 auction, assuming Mark does not redeem. As it turns out, Mark does not redeem.

If Amy bought her lien on govease.com, they will send her a notice with all the properties on which she has a right of first refusal. She just needs to check the boxes and pay the total. If Amy bought in person, at the county, she will need to contact the county during a window that is 30 days to 5 days before the 2026 auction and tell them she wants to buy the 2025 lien coming up for sale in the 2026 auction.

Amy decides not to exercise her right of first refusal, or misses the deadline, or something.

Mark’s 2025 lien goes through the 2026 auction and Sally buys it at 10% interest on a $1,000 tax lien.

On that date, if Mark redeemed from Amy’s 2024 lien, he would owe Amy $1,000 plus one year of interest at 6%, or $1,060.

That $1,060 will be added to the $1,000 Sally owes for buying the 2025 lien.

Sally will pay the county $2,060. She will get the 2024 lien and the 2025 lien, both at the same time.

Amy will be sent her $1,060 by the county.

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