On May 9, 2002, Arizona Governor Jane Hull signed into law Senate Bill 1041, legislation initiated by the Association of County Treasurers. The new law introduces two new concepts to the area of property tax liens in Arizona:

1. A tax lien, represented by a Certificate of Purchase, "expires" ten years after the last day of the month in which it was acquired if not foreclosed before then, and it is thereby self-extinguished, and

2. An actual statute of limitation for foreclosure of property tax liens is adopted, which is also ten years from the last day of the month the Certificate was acquired.

The "acquisition date" portion of the new statute refers to A.R.S. §42-18114, the statute that says the lowest bidder who pays delinquent taxes, interest, penalties and charges due on the property is the "successful purchaser".

Both of the new provisions will apply to tax liens sold only after the effective date of the Act, which should be the second week of August, 2002. The expiration and statute of limitations dates are tolled if applicable law or court order prohibits the commencement of the action to foreclose. In such a case the deadlines are extended to twelve (12) months following the termination of the prohibition.

Additionally, the 30-Day Notice requirement statute, A.R.S. §42-18202, has been amended once again, to provide that the Notice is only effective to comply with the statutory requirement if given 180 days or less prior to the lien’s maturing for foreclosure. Notices of intent to foreclose given earlier than 180 days before the lien matures for foreclosure will thus not meet the jurisdictional requirement before filing a lawsuit; however, nothing in the new law prevents a Certificate holder from notifying the property owner of the tax lien in an effort to collect it. If this were the Treasurers’ intent in adding this provision to SB 1041, it would likely fail a First Amendment Constitutional test.

As the new law affects only those liens sold after the effective date of the Act, existing tax lien holdings will continue to benefit from the historical lack of a statute of limitations. As to them, A.R.S. §42-17153 provides only three ways that the lien’s existence may be terminated:

1. Redemption of the tax lien;

2. Foreclosure of the lien and conversion into fee ownership of the property; or

3. Abatement of the tax lien by the Treasurer, as provided by law.

Senate Bill 1040, proposed by the Treasurers to ratify the practices of several of them , was held in the House Ways and Means Committee when its proponents could not be convinced to compromise.

As we have previously described it, SB 1040 would have provided statutory authorization to those county treasurers who force an involuntary assignment of privately-held tax liens when they sell subsequent delinquent tax liens on the same parcel for later years. Currently, there is no statutory authority for the treasurer to perform the assignment on behalf of the investor who has previously purchased, but not paid the subsequent delinquent taxes, with respect to a tax lien.

Proposals to modify the Bill included:

• Requiring Treasurers who wish to adopt this system to have first adopted a registered certificate system.

• In counties where the requirement is not imposed, allow for a voluntary purchase by later year lien buyers to acquire earlier year unsubtaxed positions.

• Include protections for certificate holders who have commenced foreclosure at the time their CP is assigned by the Treasurer, for attorneys’ fees and costs, while allowing the assignee of the lien position to continue the pending foreclosure action.

• Explicitly provide that the purchase price of certificates assigned under the new authority would be the amount then due on the certificate (redemption value to the original holder).

Steve May, Chairman of the House Ways and Means Committee, decided to hold the Bill given that the Treasurers would not consent to these modifications. He suggested that the matter be studied further in anticipation of next year’s legislative session when it might be reconsidered.

In the meantime, those County Treasurers who have already adopted a system similar to this will probably continue to impose the requirement that a later year lien purchaser buy out earlier-year positions. As notices published prior to auction may or may not reflect the amounts necessary to pay for these prior year lien positions, investors should be sure to inquire with the County Treasurer’s office where they hope to purchase liens what its policy on this issue is.

• The Tax Lien Primer website has moved to http://members.cox.net/manoil.

• Arizona Property Tax Liens: Guide to Profit, Protection and Prosecution (the ultimate reference, as local restaurateur Jack Durant used to say, "in my humble opinion") is scheduled for publication in May, 2002. The 280+ page Guide is packed with examples of successful investing techniques, details of how the tax lien sale and foreclosure system works in Arizona, with citations to pertinent legal authority, and useful checklists and forms. Please take a look at the table of contents, the list of illustrations and list of appendices from the book at http://members.cox.net/manoil/newbook.htm. You can also print out an Order Form at the website.

• Consider joining the National Tax Lien Association. Besides regularly conducting an excellent annual conference addressing property tax lien related issues nationwide, the NTLA has successfully spoken in favor of a viable property tax collection system in legislatures and court actions around the country. Learn more about the NTLA at www.ntlainfo.org.