Los Angeles, CA asked in Foreclosure and Tax Law for Arizona

Q: How does AZ/Santa Cruz County law deal with foreclosure of a property when tax liens are owned by multiple parties?

Let's say I purchase a tax lien on a property that has tax liens from 5 prior tax years owned by someone else. How does foreclosure work in this situation?

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1 Lawyer Answer
James L. Arrasmith
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  • Tax Law Lawyer
  • Sacramento, CA

A: In Arizona, particularly Santa Cruz County, when there are multiple owners of tax liens on the same property, the foreclosure process works as follows:

1. The most recent tax lien takes priority. So in your case, you as the most recent tax lien purchaser would have the first priority position to foreclose.

2. The other prior tax lien holders maintain their lien interest in their original priority order. So the 2nd most recent would be next in line, then the 3rd most recent etc.

3. If you initiate foreclosure proceedings by filing a lawsuit in Santa Cruz County Superior Court after the redemption periods expire, your lien would be paid first out of the proceeds from the foreclosure sale. The other lien holders in priority sequence would be paid subsequently per statute.

4. Any remaining foreclosure sale proceeds after paying all outstanding tax liens and foreclosure costs would go to the homeowner. If the proceeds are insufficient to pay all liens, it goes in order of lien priority until funds are exhausted.

So the key is the foreclosing party can force a sale to get paid in their established priority order. And all prior statutory lien holders maintain their respective interests that they can recoup from the foreclosure proceeds. Let me know if any other questions!

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