What Happens If I Don't Pay Property Taxes in Arizona?

People who own real property have to pay property taxes. The government uses the money that 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.

But what happens if you don't pay your property taxes? 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, including Arizona, have laws that allow the local government to sell a home through a tax sale process to collect delinquent taxes.

So, if you don't pay the real property taxes on your Arizona home, the county treasurer can hold a tax lien sale, and you could eventually lose ownership of your property. But the winning bidder from the sale can't get ownership of your home right away. You'll get time to catch up on the overdue amounts before this happens.

What Are the Consequences of Not Being Able to Pay Property Taxes?

Each state has a different tax sale process to collect delinquent taxes.

Tax Deed States

In some states, the taxing authority sells the home if the homeowner doesn't pay off the debt. However, the purchaser might not get the deed to the property right away. Sometimes, a redemption period must expire before the buyer receives the deed.

Tax Lien States

In other states, the taxing authority sells the tax lien, and the purchaser must foreclose or use different procedures to get a deed to the property. Arizona is considered a tax lien state.

How Does Arizona Handle Property Tax Non-Payment?

In Arizona, tax lien sales are held in February each year. (Ariz. Rev. Stat. § 42-18112). The winning bidder at the sale doesn't get title to the property at that time. Instead, the purchaser gets ownership of the tax lien and, along with it, the right to collect the tax debt, plus interest.

The winning bidder at the sale will be the one who pays the whole amount of delinquent taxes, interest, penalties, and charges due on the property and offers the lowest rate of interest on the debt. (Ariz. Rev. Stat. § 42-18114). (In some other states, the winning bidder at a tax lien sale is the party that offers the highest amount for the lien itself.) If you don't pay off the amount of the lien plus interest, the purchaser can foreclose the lien and get ownership of the home.

If no one bids for the lien, the county treasurer will assign the lien to the state. (Ariz. Rev. Stat. § 42-18113). The state can eventually apply to the county treasurer to get title to your home if you don't pay off the debt.

Notice of a Tax Lien Sale

On or before September 1st of each year, the county treasurer must mail you (the taxpayer) a notice about the delinquent taxes against the real property that are assessed in your name. (Ariz. Rev. Stat. § 42-18103). The treasurer will mail another notice before the tax lien sale. (Ariz. Rev. Stat. § 42-18108).

The notice of the tax lien sale will also be posted near the outer door of the county treasurer's office, published in a newspaper, and posted on a website. (Ariz. Rev. Stat. § 42-18109).

Redeeming the Property

Many states allow delinquent taxpayers to pay off the amounts owed and keep the home. This process is called "redeeming" the property.

Redemption Period in Arizona If Someone Buys the Lien at the Tax Sale

If someone buys the lien at the tax sale, you get a three-year redemption period to pay off the debt and redeem the property. (Ariz. Rev. Stat. § 42-18152.) After three years pass, if you haven't paid the debt, the purchaser of the lien can file a lawsuit in court to foreclose your right to redeem and get title to your home.

Even after a foreclosure starts, under Arizona law, you can still redeem until a treasurer's deed is delivered to the purchaser or the purchaser's heirs or assigns. (Ariz. Rev. Stat. § 42-18152.) Also, Arizona law states that any person entitled to redeem may do so at any time before judgment is entered. But if the redeemer has notice of the foreclosure action at the time of redemption, the court will assess the costs the plaintiff (the purchaser) has incurred, including reasonable attorneys' fees. (Ariz. Rev. Stat. § 42-18206.)

If the purchaser doesn't start an action to foreclose your right of redemption within ten years, the lien becomes void, and the purchaser loses the right to foreclose. (Ariz. Rev. Stat. § 42-18208.)

Redemption Period in Arizona If the State Gets the Lien

If no one buys the lien at the tax sale and the county treasurer transfers the lien to the state, you get a five-year redemption period. (Ariz. Rev. Stat. § 42-18261). After five years expires, the state can apply to the county treasurer to get title to your home. Your right to redeem terminates when the state gets delivery of the deed. (Ariz. Rev. Stat. § 42-18267).

The county treasurer will mail you a notice via certified mail at least 90 days before it transfers the home's title out of your name. (Ariz. Rev. Stat. § 42-18264). If the certified mailing isn't delivered and the property is in an incorporated city or town, the treasurer must post the notice on the property. (Ariz. Rev. Stat. § 42-18266).

The treasurer will also publish the notice in a newspaper. (Ariz. Rev. Stat. § 42-18265).

How Much You'll Have to Pay to Redeem

To redeem the property, you'll have to pay the county treasurer:

• the purchase price from the tax lien sale plus interest
• the amount of all taxes that the purchaser paid after the sale plus interest, and
• any fees the law requires, which the purchaser paid, plus interest. (Ariz. Rev. Stat. § 42-18153.)

What Happens to My Mortgage in a Tax Sale?

Because a property tax lien has priority, mortgages (and deeds of trust) get wiped out if you lose your home through a tax sale process. So, If your loan isn't escrowed and you fail to pay the property taxes like you're supposed to, the loan servicer will usually advance money to pay delinquent property taxes to prevent a tax sale from happening.

Most mortgages have a clause allowing the lender to add the amount it paid to bring the taxes current to your loan balance. You'll then have to make repayment arrangements with the servicer or potentially face a foreclosure by your lender.

What Options Do I Have If I Can't Afford to Pay My Property Taxes in Arizona?

Even though Arizona provides a lengthy redemption period after a tax lien sale, in most cases, it is better to take action before you get behind on your taxes to make them more affordable.

You might investigate whether you meet the criteria for a property tax abatement. Or you could file an appeal with the county assessor's office to challenge your home's value.

Get More Information About Arizona Tax Lien Sales

If you're already facing a property tax lien sale in Arizona and have questions (or need help redeeming your property), consider talking to a foreclosure, tax, or real estate lawyer.

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.