Alabama Lawyer Magazine: Money for Nothing: Who Is Entitled to the Excess Paid at a Tax Sale?

November 27, 2012

Section 40-10-28 of the Alabama Code, which is part of the statutory framework governing real property tax sales, addresses who is entitled to excess funds paid by a purchaser at an ad valorem tax sale.

According to the Association of County Commissioners of Alabama, section 40-10-28 is “[o]ne of the most confusing statutes in Alabama law.”1 Indeed, the application of section 40-10-28 has been the focus of numerous lawsuits in recent years.

What Is an Excess?

When taxes are not paid on real property, the probate court in the county where the property is located can order the sale of the property to satisfy the tax obligation.2Pursuant to procedures identified in sections 40-10-1 through -31 of the Alabama Code, Alabama county officials offer for sale by public auction thousands of tax-delinquent real properties every year, with the properties being sold to the highest bidder. The “excess” discussed in this article is the amount paid for a tax-delinquent property that exceeds the minimum bid requirement. The minimum bid is the total of the unpaid taxes, accrued interest and sale-related costs. Following the tax sale, the minimum bid portion of the amount paid by the purchaser is distributed to the various taxing authorities entitled to the taxes. The “excess” portion of the bid is held by the county treasurer to be distributed pursuant to section 40-10-28.

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