What is a Tax Certificate?

A tax certificate has the following characteristics:

1. It is a legal, marketable, document initially issued by a county.
2. It represents an interest in a parcel of real property (real estate).
3. The property it represents is usually referred to in the document by some combination of a legal description, parcel ID number, PPIN, unit number, and assessee name.
4. It’s origin is based on an unpaid lien placed against the property by the State of Alabama but originally administered by the County.

The “process” begins when the county holds it’s annual tax sale as required by law. These certificates are sold at public outcry auction to the highest bidder. If there is no bidder for a particular certificate/parcel, that certificate is “struck off to the State” or “sold to State”. The State then has possession of the tax certificate until it is either (a) redeemed at the county or (b) sold directly by the State to an investor (sometimes called a “State re-sale”).

A certificate is marketable because it can be “assigned” or transferred between parties according to the procedures of the particular county. As long as a certificate is LESS than three years old, it is eligible for redemption through the county. If a redemption occurs, any purchaser is entitled to receive what they have paid for taxes plus 12% simple interest.

There are some technical exceptions to the above but we will address those in a later post.