Tax Lien Foreclosures - Strict Compliance Is Out!
Under Arizona Revised Statutes Section 42-18202, a tax lien investor who wants foreclose the right of a property owner to redeem a tax lien is required, among other things, to send a notice of intent to file a foreclosure action by certified mail to the owner of record.
In 2005, the Arizona legislature amended Section 42-18202 by adding subsection C, which states: "If the purchaser fails to send the notice required by this section, the purchaser is considered to have substantially failed to comply with this section. A court shall not enter any action to foreclose the right to redeem under this article until the purchaser sends the notice required by this section."
A recent case from the Arizona Court of Appeals - DuPont v. Reuter - addressed the issue of what it means to substantially fail to comply with Section 42-18202. In DuPont, the tax lien holder sent the owner of record the required statutory notice of intent to foreclose, but failed to send the notice by certified mail. The tax lien holder subsequently obtained a default judgment and a Treasurer's Deed. The trial court later ordered that the Coconino County Treasurer cancel the issued Treasurer's Deed.
The Court of Appeals reversed the trial court's orders and the judgment, holding that the requirement to serve the notice of intent to foreclose by certified mail was not jurisdictional. Relying on Section 42-18101(B), the Court of Appeals reasoned that an insubstantial failure to comply with each and every element of the tax lien and foreclosure statutes does not preclude a tax lien holder's ability to foreclose. In the end, the Court of Appeals held that sending a notice of intent to foreclose by regular mail instead of certified mail was an "insubstantial failure" and did not automatically void the judgment and the issued Treasurer's Deed.
In contrast to the recent Court of Appeals decision in Roberts v. Roberts, here, the Court of Appeals seems to have grasped that the stated objective of the tax lien statutes is to secure the payment of unpaid delinquent taxes by preserving and enhancing the marketability of tax liens and Treasurer's Deeds, which is essential to the maintenance of county government.
The DuPont case frankly amazes me. Here you have a property owner that was willing to pay what likely amounted to tens of thousands of dollars to an attorney to fight for a property that the same owner had effectively forgotten about. The property owner in DuPont admittedly received notice that the tax lien owners were going to foreclose on the property. However, instead of paying off her back taxes, the property owner was willing to fight out the issue of whether she should have received notice by certified mail instead of regular mail. This woman had been delinquent on her property taxes for over thirteen years, and the delinquent taxes totaled some $240,000. Coconino County certainly could have put that money to good use. In the end, the property owner in the DuPont case, like property owners generally, have to take some level of responsibility in the care and ownership of property, which includes paying property taxes. The legislature has clearly codified a system in which an insubstantial failure to strictly follow the tax lien foreclosure rules will not prevent a tax lien investor from obtaining a Treasurer's Deed to any given property.
