Posted over 3 years ago

Alabama Tax Sale Investors and Improvements - Protect Your Rights

If you make improvements to an Alabama tax sale property, there are strict rules you have to follow if someone wants to redeem. Failure to follow the rules exactly can result in the investor losing tens of thousands of dollars. The rules are VERY easy, if you know about them.  Many investors do not know about them.

Redemption rights can extend far after investors have a tax deed.  Many "vulture investors" buy redemption rights from taxpayers and then exercise them. As a result, you can't be complacent and think a taxpayer could never afford to redeem.

Alabama allows tax sale investors to take possession of property as soon as they have a tax certificate, usually a couple of weeks after the auction. The investor does not own the property, but is allowed to use it or rent it out, as long as they don't engage in DIY ejecting the current occupants. If it is abandoned, go ahead and take possession. If not, follow the rules for an ejectment lawsuit. That is not the point of this article, just the background.

If property contains a residential structure, investors can make "preservation improvements."  Basically, that consists of repairs. If the taxpayer redeems, it will have to also pay the investor for the VALUE (not the cost) of those preservation improvements.

If the property is located inside the official boundaries of an urban renewal or urban redevelopment district, then the investor can  make any kind of improvements to any type of property. Residential, commercial, industrial, vacant land. Repairs, upgrades, entirely  new construction. It doesn't matter. The redeeming party will have to pay the value of those improvements.

There is a very rigid process for determining the value of the improvements. The parties must go through a mandatory binding arbitration process.  It is short, and does not have to involve any third party fees or expenses. If that does not resolve the issue, the parties can continue negotiations or go to court.

I am finding that most investors do not realize there are very short deadlines to respond to a taxpayer's redemption request, and there are VERY SPECIFIC things that must be done in exactly the right way. If the law is not followed exactly, the investor could lose the right to be paid anything at all for the improvements. That's what I said--NOTHING.

Please download the article HERE and put a copy in every single property file you create for your tax sale properties. Even if you think you remember the rules, refer to the article as soon as you receive a redemption request.  There is no shame in referring to a checklist. Ask any airplane pilot. Better safe than sorry!

Comments (2)

  1. After I receive my certificate of tax sale, what all can I do to the property or the abandoned trailer on it? Do I need to purchase a update trailer tag sticker? 

  2. Hi Denise, after the tax auction sale, should I wait 15days or until I receive something in mail?