People who own real property must pay property taxes. The government uses the money these taxes generate to pay for schools, public services, libraries, roads, parks, and the like. Typically, the tax amount is based on a property's assessed value.
When homeowners don't pay their property taxes, the overdue amount becomes a lien on the property. A lien effectively makes the property act as collateral for the debt. All states have laws that allow the local government to sell a home through a tax sale process to collect delinquent taxes.
If you don't pay your property taxes in Alaska, you could eventually lose it through a property tax foreclosure. But under Alaska law, you get time to reclaim the property after a tax foreclosure by redeeming it or, in some cases, by repurchasing it.
Once the past-due amount, includes the accrued taxes, interest, penalties, and costs, becomes a lien, the municipality can start a foreclosure by filing a petition (a lawsuit) with the court. The court then enters a judgment and foreclosure decree. (Alaska Stat. §§ 29.45.320, 29.45.330, 29.45.380.)
A public sale doesn't happen—foreclosed properties are transferred directly to the municipality. (Alaska Stat. §29.45.390). Your home's title (ownership) then goes to the municipality or applicable borough after the redemption period (see below) expires. (Alaska Stat. § 29.45.450.)
After the municipality files the foreclosure petition with the court, it must:
Within ten days after the first publication or posting, the municipality must mail you a notice letting you know that it filed a foreclosure petition. (Alaska Stat. § 29.45.330.)
You can stop the foreclosure by paying the delinquent amount, including taxes, penalties, interest, and costs, up until the time the court transfers the home to the municipality. (Alaska Stat. § 29.45.340.)
Alaska law provides you with one year to get your home back after a tax foreclosure. (Alaska Stat. § 29.45.400.) This period is called a "redemption period."
To redeem (reclaim) the home, you must pay the municipality:
You'll also have to pay any newly accrued taxes or assessments, as well as other liens or claims on the home. (Alaska Stat. § 29.45.400.)
At least 30 days before the redemption period expires, the clerk of court must:
Within five days after the first publication, the clerk of court must mail you a copy of the redemption period expiration notice by certified mail. (Alaska Stat. § 29.45.440.)
The right of redemption expires 30 days after the date of the first notice publication. (Alaska Stat. § 29.45.440.)
You may live in the home during the redemption period. But if you cause damage to the home, the municipality may declare an immediate forfeiture of your right to possession and you'll have to give it up. (Alaska Stat. § 29.45.430.)
Alaska law also gives you ten years to repurchase your home after a property tax foreclosure so long as the property has not yet been sold to a new owner. (Alaska Stat. § 29.45.470.)
To repurchase the home you'll have to pay:
If the municipality decides to keep the property for a public purpose, you can repurchase it up until the municipality adopts an ordinance dedicating tax-foreclosed property for this purpose. (Alaska Stat. § 29.45.470.)
If you have a mortgage on your home, the loan servicer might collect money from you as part of the monthly payment to pay the property taxes. The servicer then pays the taxes on your behalf through an escrow account.
But if the property taxes aren't collected and paid through this kind of account, you must pay them directly.
If your loan isn't escrowed and you don't pay the property taxes, the loan servicer might pay any delinquent taxes and then bill you for them. Here's why: Property tax liens almost always have priority over other liens, including mortgage liens and deed of trust liens. (For purposes of this discussion, the terms "mortgage" and "deed of trust" are used interchangeably.)
Because a property tax lien has priority, a tax foreclosure process wipes out any mortgages. So, the loan servicer will usually advance money to pay delinquent property taxes to prevent this kind of foreclosure from happening. The servicer will then demand reimbursement from you, the borrower.
The terms of most mortgage contracts require the borrower to stay current on the property taxes. If you don't reimburse the servicer for the tax amount that it paid, you'll be in default under the mortgage's terms.
The servicer can then foreclose on the home in the same manner as if you had fallen behind in monthly payments.
After demanding repayment of the amount it paid for the taxes, penalties, plus interest (assuming you repay this tax debt), your servicer will probably set up an escrow account for the loan.
Each month, you'll have to pay approximately one-twelfth of the estimated annual cost of property taxes—and perhaps other expenses, like insurance—along with your regular monthly payment of principal and interest. This money goes into the escrow account.
The loan servicer then pays the cost of the taxes and other escrow items on your behalf through the escrow account.
Many mortgages have a clause allowing the lender to establish an escrow account basically at any time. The servicer establishes and manages the account on the lender's behalf.
To find out if and when the lender can set up an escrow account for your loan, read your mortgage contract and any other relevant documentation you've signed, like an escrow waiver.
The downside to having an escrow account is that you'll have to make a bigger monthly payment to the servicer. On the positive side, having an escrow account saves you from having to come up with a large amount of money when tax bills, and perhaps other bills, are due.
If you're having trouble paying your property taxes, you might be able to reduce your tax bill or get extra time to pay.
Talk to a foreclosure lawyer, tax lawyer, or real estate lawyer if you're facing a tax foreclosure in Alaska and have questions about the process or need help redeeming your property,
To learn more about property taxes and other aspects of homeownership in general, get Nolo's Essential Guide to Buying Your First Home by Ilona Bray, J.D., Attorney Ann O'Connell, and Marcia Stewart.