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Alabama Law for You

  • Writer's pictureGregory Stanley

Alabama Frankenstein Property Tax Law

Updated: Apr 21

The stated purpose of tax sales legislation in Alabama is to incentivize people to pay their property taxes or pay an interest to the investors if they did not pay on time. The tax system is explicitly NOT intended to take property from owners without a great deal of notice and due process.

Half of Alabama counties have moved to the controversial "Bid-down Tax Lien Auction" format. This new Alabama "Frankenstein" system has taken the worst features from several other states, but, just like depictions of the Frankenstein monster, the creator couldn't make anything useful from the discarded remains of other states' laws. I mean, why does Frankenstein's monster always have an ugly face and a humpback?

Well, here is a brief overview of several unattractive features with the new tax lien bid-down system:

  • This new tax lien law subverts the entire tax lien system with a bias towards wealthy investors seeking to take the property from individual homeowners who own their small properties with no debt. The system starts with bidding down interest rates to virtually zero which benefits large landowners and ends with taking property of small homeowners with only 30-days’ notice.

  • Savvy large-scale property owners are de-incentivized to pay their taxes because they get a virtually 0% interest rate loan on their taxes under the new system. If you look in ParcelFair.Com you will see massive areas of land highlighted in blue that indicates these property owners decided to simply not pay taxes this year.

  • On the other side, Institutional investors who historically bought millions of dollars of tax liens in Alabama for the 12% annual interest rate are stopping investing because interest rates are down to basically 0% annually.

  • But the predatory Institutional investors who want to take property from Alabama homeowners are coming to Alabama in hopes of taking advantage of our citizens who aren't aware they could lose their house.

  • This law is also bad for neighborhoods because it stops maintenance on tax lien property. The new law prohibits investor maintenance on abandoned tax delinquent property. Broken windows, unsafe premises, and vagrants will be left alone in these houses. This means tax delinquent properties in our most expensive neighborhoods could be open to vagrants for at least three years. (Crack house coming soon to a house near you!)

  • The new law also does not allow an investor to take possession of abandoned houses. Imagine this: A drug dealer moves into an abandoned house. Under the new law, no one has the right to evict or eject them. ("I'm sorry officer, you cannot come in, and my squatting here is a civil matter, and unless you have someone to press criminal trespass charges, buzz off.")

  • Without the opportunity for possession, local investors have little incentive to purchase tax liens because most local investors want to rehab vacant abandoned properties.

I question the Constitutionality of a state taking property from an owner with only 30 days of actual notice and awarding it to a big out of state investor. Possession has always been a legal prerequisite to taking away a title--until 2022. The new law goes into full force in 2022 and it seems to eliminate that long-standing requirement that any plaintiff who is asking to clear the title on property must be in possession of the property. The reason for this staple of possession is to ensure the current owner has plenty of actual notice that the property is being taken from them.

The current statutes require either 3 years, 10 years, and 20 years of adverse possession (depending on the circumstances) as a clear form of notice to the owners before a lawsuit to take title of property can be filed. However, this new law requires no possession and a suit to quiet title can be filed while the owner/occupant (think 70-year-old pensioner who paid off the mortgage 3 years ago and didn't read the letter from the county) is still living peacefully having no idea they are about to be made homeless. I fully expect a great deal of lawsuits against this radical departure from, and contradiction of, our current state law which is designed to encourage tax payments while protecting homeowners.

LOOKING FORWARD: After the Alabama Legislature repaired the miss-used law regarding void sales and occupied property, we can hope the Frankenstein tax lien system will be changed after it implodes in Summer of 2022.

This is not legal advice, but my opinion.

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