By Jones Osborn II

Every owner of real property has to pay property taxes. There are a few exceptions, of course. For example, the property of governmental units, schools, charities, churches, and certain other non-profit organizations is exempt from taxation so long as it is not used for profit-making purposes. Some states also have limited exemptions for indigent widows, orphans, veterans and the like. But in general, if you own real property you can expect to pay an annual property tax.

Lack of Notice. What happens if you don't receive your tax bill for one or more years, and the back taxes begin to pile up? After a few years the bill can become huge especially when interest and penalties are added in.

This unfortunate state of affairs seems to occur with some regularity. Usually it is because the tax bill is sent to the wrong address. The property owner may move and forget to tell the assessor, which often happens. The tax bill may be sent to a lender who pays the taxes out of an impound account - but after the loan is paid off the lender may fail to tell the assessor, and the tax bill continues to be sent to the lender who just ignores it. Sometimes the treasurer just makes a mistake in transcribing his mailing list. Whatever the cause, you can be blissfully unaware of the taxes piling up until it's too late. Believe it or not, it's actually possible to lose your property to taxes without ever having received actual notice.

Is This Constitutional? You might ask how a property owner can be stuck with interest and penalties or lose his property if he never received a tax bill. That's a good question. Both the Federal and Arizona Constitutions provide that property may not be taken without "due process of law." The first requirement of due process is notice. One can hardly be said to have received due process if he is never notified of a pending procedure to take his property. On the other hand, the government must have dependable tax revenues to operate, and one should not be able to avoid taxes by failing to tell the county treasurer where he lives.

To resolve this problem the courts have developed a flexible standard for determining when adequate notice has been given. In criminal cases, where a person's life or liberty may be in jeopardy, actual notice is nearly always required, usually by arresting the person and bringing him before a judge. In a civil suit, the requirements for adequate notice are also strict, usually requiring personal service, but in certain circumstances "constructive notice" may be allowed. This might consist of publication in a newspaper if the party cannot be found and served. However, in the case of a tax levy, the requirements are generally much more lax. As long as the taxing authority provides for some kind of reasonable notice and an opportunity to be heard, it is likely to be considered adequate.

Statutes. Most states have statutes providing for something less than actual notice when it comes to taxes. Typically, the statutes will provide for publication in a newspaper for several weeks, together with mailed notice to the taxpayer's last known address. It is up to the taxpayer to keep the treasurer informed of his current address and to make sure his taxes are paid when due.

In Arizona, the statutes say that notice of taxes shall be published once a week for four consecutive weeks in a newspaper, and that "no other demand for taxes is necessary." Of course, the county treasurer sends you a tax bill, but it is not a legal requirement.

If your taxes are not paid, the treasurer is required by law to send you a notice of the delinquency by September 1 of the following year, to your "last known address." There is no requirement that you actually receive it, or that this address be your correct current address. The same sort of notice is required when the tax lien on your property goes up for sale. Additional notices are required if the tax lien is foreclosed, including publication, mailing, and posting of the property; however, actual notice to the property owner is never required, as long as the treasurer does the things required by statute.

Mortgage Holders. Mortgage lenders often require the tax bill to be sent to them so that they can insure that the taxes are paid. Unfortunately, many lenders fall into the habit of ignoring the tax bills after the loan as been paid off, not bothering to notify either the county treasurer or the borrower. This allows the tax bills to pile up if the property owner doesn't realize he hasn't been receiving his tax bills. To cure this situation, the Arizona legislature passed a statute several years ago providing that:

1. The county treasurer must send a copy of the tax bill to the owner at his last known address, even if the lender is paying the taxes.

2. When the loan has been paid off, the lender must either return the tax bill to the treasurer with the borrower's last known address or forward it to the borrower, notifying the treasurer it is doing so.

3. If the lender fails to comply with (b), it is responsible to the owner for all resulting interest and penalties.

This statute does not excuse anyone from taxes, penalties or interest, but at least it provides the property owner with a source for reimbursement of interest and penalties where the lender has failed to give the required notice.

Conclusion. If you are a property owner, make sure you know the status of the taxes against your property, and check up on it every year or so, even if your lender is paying your taxes through an impound account. This is especially true if you own multiple properties, because it is easy for one property to slip by unnoticed. Do not assume that everything is all right just because you haven't received a notice that taxes are past due. And if you change your address, be sure to notify the assessor. Remember, it is the property owner's responsibility to make sure his taxes are paid.