Does The Government Seize Your Property If You Underpay Your Property Taxes?

You may have heard about a recent decision by the Michigan Supreme Court that said the government could not seize a home because the owner underpaid the property taxes by $8.41. The court’s reasoning was that the outcome amounted to the government taking the property without just compensation, in violation of the constitutional guarantee that the government won’t do that.


Nathan Hannah, Attorney

It’s an interesting case, but I don’t think it signals any change coming in Arizona, or in most other states for that matter. That’s because in Arizona, as in a number of other states, when an owner loses property as a result of unpaid real property taxes, the government doesn’t usually end up with the property. Instead, when the taxes become delinquent, a lien on the property, known as a certificate of purchase, is sold at an auction. The private party who buys the lien can then, after holding the lien for the required time period, foreclose the lien and become the owner of the property.

By the time an Arizona property tax lien is foreclosed, the government has long since collected the taxes it was owed. In fact, it collected them at the time that the lien was sold at auction. As a result, the government didn’t take anyone’s property. It collected the tax revenue that it was originally entitled to, with interest, but nothing more. If anyone got a windfall, it was the buyer of the certificate of purchase.

As I often do when I discuss this kind of topic in this space, I have just oversimplified a complex process that takes a long time. I’m just trying to give you a general overview.

I suppose it’s possible that someone could make a decent argument that even under Arizona’s real property tax collection procedures, the outcome results in a taking without just compensation, because the government is involved in the process. It seems more likely to me, however, that since the government doesn’t end up with the property, a court would decide there is no taking of property by the government, so there’s no violation of the constitutional guarantee of just compensation.

In my experience, it’s rare for a buyer of a certificate of purchase to end up with a property that’s substantially more valuable than what it cost to buy the certificate and foreclose it, anyway. Usually, the owner of the property will find a way to pay the tax before the certificate can be foreclosed. Another factor is that frequently the certificates of purchase that are available are for properties that are undesirable for one reason or another, so there isn’t much real value there for the foreclosing party to take, or for the property owner to lose. 

Finally, here’s a somewhat related bit of information on the subject of property taxes: did you know that if you miss the November 1 deadline for paying the first half of your property taxes, you can avoid paying the interest and penalty for late payment by paying the whole year’s taxes on or before December 31? 

Nathan B. Hannah is a Shareholder in the Tucson office, and practices in the areas of estate planning and administration, real estate, and commercial transactions.  He is also a noted blogger, and you can find more of his articles on his private blog,

Contact Attorney Hannah:  or  520/ 322-5000

This communication is designed to bring legal developments of interest to the attention of our clients and others. It should not be relied upon as a substitute for specific legal advice in a particular matter. For further information on any of the subjects discussed, or for legal advice in connection with any particular matter, please contact us.