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ARIZONA STATE SENATE
Fifty-Seventh Legislature, Second Regular Session
judicial foreclosure; excess proceeds sale
Purpose
Allows an action to foreclose the right to redeem a property tax lien that is filed in the superior court to include a request to determine if a sale of the property to recover excess proceeds (excess proceeds sale) is reasonable. Allows a certificate holder, in addition to the property owner, to request the court to determine if an excess proceeds sale is reasonable at any time before the court's judgment is effective.
Background
By September 1, the county treasurer must send a notice of delinquent taxes to each person or firm that owes delinquent taxes against real property. By December 31, the county treasurer must publish a list of all real property with delinquent taxes and an accompanying notice that the county treasurer will sell a property tax lien at public auction. The county treasurer must sell a property tax lien to the person who pays the aggregate amount of all delinquent taxes due on the property, including penalties, interest and charges. The county treasurer must deliver a certificate of purchase to each lien purchaser at the sale or provide for a registered certificate in the county treasurer's records.
Between 3 and 10 years after a tax lien is sold, the certificate of purchase holder (certificate holder) may bring an action to foreclose the right to redeem. The action to foreclose the right to redeem must be filed in the superior court in the county in which the real property is located and name the county treasurer as a party to the action. Between 30 and 180 days before filing an action to foreclose, the certificate holder must send a notice by certified mail to the county treasurer and the property owner. A property owner whose right to redeem is being foreclosed may request the court to determine if an excess proceeds sale is reasonable. If the court finds that the tax lien sale is valid, the tax lien has not been redeemed and the defendant's request for an excess proceeds sale is reasonable, the court must enter judgment: 1) foreclosing the right of the defendant to redeem; 2) directing the property to be sold in an excess proceeds sale; and 3) setting the opening bid, as prescribed. An excess proceeds sale must be held within 60 days after the date a judgment is entered by the court directing the property sale. An excess proceeds sale is reasonable if the property sale price is likely to be more than $2,500 above all outstanding costs, fees and interest related to the property.
Statute requires a qualified entity to distribute proceeds of an excess proceeds sale within 90 days after the sale, notify the court after the proceed distributions have been made and dispose of any unclaimed monies after 90 days pursuant to Arizona's Unclaimed Property Act. Any party in the action to foreclose the right to redeem may bring civil action against the qualified entity for the entity's failure to comply with the proceed distribution requirements (A.R.S. §§ 42-18101 – 42-18236).
There is no anticipated fiscal impact to the state General Fund associated with this legislation.
Provisions
1. Allows an action to foreclose the right to redeem that is filed in the superior court to include the request to determine if an excess proceeds sale is reasonable.
2. Allows a certificate holder, in addition to the property owner, to request the court to determine if an excess proceeds sale is reasonable.
3. Specifies that a property owner or certificate holder that is requesting the court to determine whether an excess proceeds sale is reasonable may make the request at any time before the court's judgment is effective pursuant to court rules.
4. Specifies that any party in the action to foreclose the right to redeem that is entitled to a portion of the proceeds may bring civil action against the qualified entity that distributed the proceeds for the entity's failure to comply with the statutory distribution requirements
5. Clarifies the opening bid amount for an excess proceeds sale.
6. Makes technical and conforming changes.
7. Becomes effective on the general effective date.
House Action
WM 2/11/26 DP 9-0-0-0
3rd Read 3/9/26 52-0-7-0-1
Prepared by Senate Research
March 18, 2026
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