Tax Certificate Process

Practice County Tax Certificate Process

What are tax certificates (Certificates of Purchase)?

Tax due dates and delinquency dates are best understood by example. In Arizona, one half of the annual property taxes become due October 1, and the second half the following March 1. The first half of the taxes become delinquent if not paid by 5:00pm on November 1 (of 2013 for example), and the second half become delinquent at 5:00pm on May 1 (of the following year, 2014). By the following December (2014), delinquent notices are sent to the homeowners stating that a tax certificate will be auctioned on a specified date if the taxes are not paid.  The Treasurer in every Arizona county prepares a list of the properties with delinquent taxes. The list is published in January or February (2020).

The tax certificate’s face amount consists of the sum of the following: delinquent real estate tax (may include previous years delinquent taxes, penalties and costs), interest from the date of the delinquency, advertising penalty fee, a charge for the issuance of the tax certificate, and the “Taxpayer Information Fund” fee.

Tax certificates are a high priority lien against property which means there are very few other claims against a property which would be paid before the tax certificate lien. It even supersedes some IRS liens.

The Auction

The tax certificate auction must take place during the month of February. (Note: tax certificates and the auction of them are governed by Title 42, Chapter 18 of the Arizona Revised Statutes. All requirements mentioned in this document come from Chapter 18 without the legalese).

To make a simplified analogy, think of the purchase of a tax certificate as a loan to the property owner. In return, the investor receives interest on the money loaned.

The tax certificate itself conveys no property rights. It is simply a lien carrying an interest rate. However, if the certificate is not redeemed within three years of the date of the original sale, the certificate holder does have the right to foreclose on the property and take possession after taking all the proper steps in the Judicial Foreclosure process.

The county Treasurer publishes the delinquent tax list and the auction notice at least one time in a newspaper of general circulation in the county. The publication is at least two weeks but not more than three weeks before the date of sale.

The interest on a certificate ranges from 0 to 16%. Bids are entered with the certificate going to the bidder willing to take the lowest interest rate. Simple interest accrues on a monthly basis. For example, if the certificate carries an interest rate of 12%, then interest will accrue at 1% simple interest every month until the certificate is redeemed. If the certificate is not sold, it becomes the property of the state, bears an interest rate of 16%. Most counties today do not issue paper certificates. The certificate is kept as an electronic file at the Treasurer’s office.

Now you own a tax certificate, so what can happen next?

When the owner redeems the certificate, they pay the delinquent taxes, interest, and assorted fees and costs. The following business day a redemption check is sent to the certificate holder, including investment plus interest accrued, beginning the first day of the month following the date of purchase of the certificate.

The certificate can be sold and reassigned to another person (they must register with the Treasurer's office as a lien holder). This sale must be reported to the Treasurer’s Office so a corrected certificate, with correct W-9 information can be retained.

Taxes are at least 2 years delinquent when they become available for tax lien certificate purchase. Parcels can be foreclosed on through quiet title court action three (3) years after the date of sale.

Practice County makes no representation that a property is usable or marketable. Be sure to investigate thoroughly. Many times customer service at a title company can be helpful.

If your certificate remains active for 10 years without redemption or foreclosure action, the lien will expire, making your certificate null and void (worthless).

Refundable and non-refundable fees

The advertised certificate amount consists of delinquent real estate taxes, accrued interest and penalties, a $10.00 certificate fee, a $10.00 taxpayer information fund fee, and an internet sale fee. Taxes, interest, penalties and fees are included in the face value of the certificate, they are interest bearing, and in Practice County.

PLEASE NOTE:  The fees imposed on the Certificates of Purchase offered at a Tax Sale are assessed by statute, specifically, ARS 42-18118 (Certificate Fee) and 42-18116 (Processing Fee). In accordance with statutes, the processing fee is non-refundable (ARS 42-18153). The Treasurer does not make any guarantees that a purchaser will make money on a purchase and should be aware of the fact that the property owner has a right to redeem the tax lien AT ANY TIME.

If there is an asterisk (*) next to the advertised certificate amount; then a prior certificate or certificates exist on this parcel. In this case there is a $10.00 non-refundable fee per certificate included. (Contact the Treasurer’s office for the number of existing certificates.)


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