Generally the payoff in property tax liens is in interest earned and paid on redemption, or profit on the sale or use of the liened property after foreclosure.

In the latter case, though, the investor is likely to have to hold the property for some period of time before realizing the economic benefit on its disposition. And -- surprise -- the ultimate return on investment can be substantially impacted by the property’s carrying costs, particularly the property taxes that inevitably accrue against it.

Our sources have advised us that the Maricopa County Assessor implemented a new vacant land valuation model this year, that in many cases resulted in drastically increased assessed valuations.

We recently appealed the valuation on two properties acquired by a client through tax lien foreclosure. On one, the appeal resulted in lowering the estimated tax liability for the 2001 tax year from $16,000 to $4,000; the other went from $15,000 to $4,000.

While such reductions may not be representative of every case, they dramatically illustrate what is sometimes possible when new computer valuation systems are applied without any human consideration. And mis-classified property can result in the Assessor using incorrect assessment ratios, that might increase the assessed valuation and, ultimately, the property tax. For example, residential property is assessed at 10% of property value, land is assessed at 16%, and commercial property is assessed at 25%.

Property valuation and classification may be appealed administratively or judicially in Arizona. The administrative appeal mechanism is available only for 60 days following the Assessor’s mailing of the "Notice of Value" postcard (or until the deadline printed on the card). The card is usually sent in January or February, stating the valuation that the Assessor will use for the following year’s property tax bills. The notices of valuation sent out earlier this year allowed for an April 176, 2001 appeal deadline for the 2002 valuations. After that date, the 2002 valuations could only be appealed by a judicial action.

Judicial appeal of valuation or classification is available until December 15th of the year preceding the tax year for which the valuation has been issued. If the property owner acquires the property after January 1, and the prior owner did not appeal the valuation or classification, then the new owner has until December 15th of the acquisition year to appeal that year’s valuation. In other words, an investor successfully foreclosing on a tax lien after January 1, 2001, has until December 15, 2001 to appeal the 2001 valuation on the property as well as the 2002 valuation.

For properties with a full cash value of less than $300,000 or which are classified as Class 3 property (owner-occupied property or property rented to a relative), the Arizona Tax Court provides a small claims procedure which may facilitate the appeal without the use of an attorney. Certain of the court forms necessary to file such an appeal are available from the Superior Court Self-Service Center. To learn more about the valuation and tax calculation process, check The Maricopa County Assessor's website. The Assessor also provides Helpful Information for Property Tax and Classification Appeals.

Please contact us if you have Arizona property that might benefit from a valuation or classification review, and possibly an appeal.

Mark L. Manoil
Carson Messinger Elliott Laughlin & Ragan, PLLC
3300 North Central Avenue, 19th Floor
Phoenix, AZ 85012
602-264-2261

Arizona Property Tax Lien Primer: http://members.cox.net/manoil

The information presented in this communication is not intended as legal advice, nor does this communication establish an attorney-client relationship. The opinions expressed are those solely of Mark Manoil, unless otherwise noted. I specifically disclaim any liability for any reader's detrimental reliance on the information and views presented herein. If you need professional advice, please contact a competent professional.

© 2001 Mark L. Manoil