Competing Back Tax Liens Have Parity, Not Lien Priority
Robert P. Lindfors
Treasurer’s deeds pose an insurance risk. The
uncertainty of tax liens and the foreclosure of others’ redemption rights pose a
risk that title companies are reluctant to insure. Unless the Treasurer’s deed
is validated by a Court order, title insurers will not even consider insurance.
Under
Arizona law, to secure payment of delinquent real estate taxes, county
treasurers can sell at auction tax liens. Back tax liens are interest bearing
investments. The purchaser of the back tax lien receives a certificate of
purchase which recites among other matters, the tax parcel sold and the
purchaser’s name. Certificates of purchase entitle the certificate holder to a
Treasurer’s deed to the tax parcel after certain statutory conditions are met.
The
tax foreclosure suit must be carefully examined for personal service of process
on all necessary defendants. Everyone having a record interest should be sued as
a defendant.
Where
real estate taxes are delinquent for multiple years, there may be numerous
separate back tax certificates. Back tax certificates can be enforced
independently. However, the back tax certificates are liens in parity and not
priority. The back tax certificate for an earlier year’s tax is not preferred to
the tax lien for a subsequent year.
A.R.S. § 42-17153 (C)(3)(b) provides a back
tax certificate is not a prior or superior lien to the liens for taxes in any
other years. Rather, the back tax liens have lien parity.
The
foreclosure of one year’s back tax lien does not discharge or release the lien
of another year’s tax. The back tax liens can only be discharged by payment of
the tax.
Title
officers should require the payment and redemption of all back tax liens before
insuring the tax parcel.
This article is
made available with the understanding that it is informational only, and it has
not been prepared to provide specific legal advice that may be relied on by a
reader. The author is under no obligation to update the information in the event
of a change in the law. |
