Bill Text: AZ HB2196 | 2024 | Fifty-sixth Legislature 2nd Regular | Introduced
Bill Title: Commercial property assessed financing
Spectrum: Partisan Bill (Republican 1-0)
Status: (Introduced - Dead) 2024-01-17 - House read second time [HB2196 Detail]
Download: Arizona-2024-HB2196-Introduced.html
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REFERENCE TITLE: commercial property assessed financing |
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State of Arizona House of Representatives Fifty-sixth Legislature Second Regular Session 2024
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HB 2196 |
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Introduced by Representative Hendrix
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An Act
amending title 9, chapter 4, article 8, Arizona Revised Statutes, by adding section 9-499.19; amending section 11-201, Arizona Revised Statutes; amending title 49, Arizona Revised Statutes, by adding chapter 12; relating to capital improvements for real property.
(TEXT OF BILL BEGINS ON NEXT PAGE)
Be it enacted by the Legislature of the State of Arizona:
Section 1. Title 9, chapter 4, article 8, Arizona Revised Statutes, is amended by adding section 9-499.19, to read:
9-499.19. Authority to establish c-pace program; definitions
A. A city or town may provide for or allow the construction, installation or modification of critical capital expenditure improvements on qualifying property by establishing a C-PACE program pursuant to title 49, chapter 12.
B. This section does not allow a city or town to enter into a financing agreement for the direct financing of a qualifying improvement.
C. For the purposes of this section, "C-PACE program", "critical capital expenditure improvement", "financing agreement", "qualifying improvement" and "qualifying property" have the same meanings prescribed in section 49-1601.
Sec. 2. Section 11-201, Arizona Revised Statutes, is amended to read:
11-201. Powers of county
A. The powers of a county shall be exercised only by the board of supervisors or by agents and officers acting under its authority and authority of law. It has the power to:
1. Sue and be sued.
2. Purchase and hold lands within its limits.
3. Make such contracts and purchase and hold such personal property as may be necessary to the exercise of its powers.
4. Make such orders for the disposition or use of its property as the interests of the inhabitants of the county require.
5. Levy and collect taxes for purposes under its exclusive jurisdiction as are authorized by law.
6. Determine the budgets of all elected and appointed county officers enumerated under section 11-401 by action of the board of supervisors.
7. Provide for or allow the construction, installation or modification of critical capital expenditure improvements on qualifying property by establishing a C-PACE program pursuant to title 49, chapter 12. This paragraph does not allow a county to enter into a financing agreement for the direct financing of a qualifying improvement. For the purposes of this paragraph, "C-PACE program", "critical capital expenditure improvement", "financing agreement", "qualifying improvement" and "qualifying property" have the same meanings prescribed in section 49-1601.
B. Except for the purposes of acting as an intermediary in a license transfer or sale, a county shall not own a commercial cable television system or any other pay television system.
C. Section 11-251.05, subsection A, paragraph 1 does not authorize a county to levy and collect taxes for any purposes beyond those otherwise specifically authorized by statute.
Sec. 3. Title 49, Arizona Revised Statutes, is amended by adding chapter 12, to read:
CHAPTER 12
COMMERCIAL PROPERTY ASSESSED CAPITAL EXPENDITURE FINANCING PROGRAM
ARTICLE 1. GENERAL PROVISIONS
49-1601. Definitions
In this Chapter, unless the context otherwise requires:
1. "Capital provider" means a private entity, or its designee, successor or assign, that finances or refinances a qualifying improvement pursuant to this Chapter.
2. "C-PACE Program" or "Program" means a special assessment program enacted by a local government that authorizes privately financed commercial property assessed capital expenditure financing for eligible improvements pursuant to this chapter.
3. "Critical capital expenditure improvement" means an improvement to an existing structure or a component of new construction that contributes to the structural and mechanical function of qualifying property or that contributes to the efficient use of resources and materials in a qualifying property and that has a weighted average useful life of ten years or more.
4. "Financing agreement" means an agreement under which a private property owner agrees to repay a capital provider for the special assessment financing, including details of finance charges, fees, debt servicing, accrual of interest and penalties and terms relating to treatment of prepayment and partial payment of the special assessment financing.
5. "Governing body" means the body or board that by law is constituted as the legislative department of the county or municipality.
6. "Local government" means a county or municipality that establishes a C-Pace program pursuant to this chapter.
7. "Local program authority" means an official, other than the county treasurer, or agency designated by a local government to perform certain obligations related to entering into special assessment agreements, imposing special assessments and enforcing and collecting special assessments under this chapter.
8. "Program administrator" means an official, agency OR PRIVATE THIRD PARTY that may be designated by a local government to administer a c-pace program ESTABLISHED pursuant to this CHAPTER and may include a local program authority.
9. "Program guidebook" means a comprehensive document adopted by a local government that establishes appropriate guidelines, specifications, approval criteria and other standard forms consistent with administering a c-pace program, including forms for a special assessment agreement, notice of assignment of special assessment lien, notice of special assessment lien, notice of delegation of authority and project application.
10. "Project application" means an application submitted to a program administrator to demonstrate that the proposed improvements qualify for special assessment financing pursuant to a c-pace program.
11. "Property owner" means the owner listed on a qualifying property's legal documents on file in the county recorder's office, the owner of an improvement on a possessory right or the owner of an estate for years or leasehold created pursuant to a written ground lease agreement OR government property lease excise tax development agreement.
12. "Qualifying improvement" means a permanent affixed critical capital expenditure improvement that is installed on qualifying property as part of the construction or renovation of the qualifying property.
13. "Qualifying property" means either of the following:
(a) Privately owned commercial, industrial or agricultural real property, multifamily residential real property with five or more dwelling units, an improvement on a possessory right or property owned by a private, nonprofit or tax-exempt entity other than a residential property with not more than four dwellings.
(b) Real property that is owned by this state or a local governmental entity but that is leased to a privately owned entity or real property improvements that are owned by a private party pursuant to a written ground lease agreement, government property lease excise tax development agreement or similar agreement whose owner of record, including this state or any local governmental entity in addition to a private entity, consents in writing to a special assessment being levied on the real property pursuant to this chapter.
14. "Region" means the geographic area within the corporate limits of a municipality, the unincorporated area of a county and the incorporated areas of a county with the consent of affected municipalities in which the county seeks to impose a special assessment pursuant to this chapter.
15. "Special assessment" means a voluntary assessment that is imposed on a qualifying property by a local government pursuant to this article for the total amount of special assessment financing pursuant to a special assessment agreement.
16. "Special assessment agreement" means a written agreement between the applicable local government and the property owner in the form prescribed by the local government that sets forth the terms and conditions of the special assessment and that allows the local government to impose a special assessment on the qualifying property to repay the special assessment financing.
17. "Special assessment financing" means financing and refinancing provided by a capital provider pursuant to a financing agreement for qualifying improvements pursuant to this article.
18. "Special assessment lien" means a lien to secure the special assessment that remains on the qualifying property until paid in full.
49-1602. Commercial property assessed clean energy program; establishment
A. To establish a commercial property assessed clean energy program, a governing body must adopt a resolution or ordinance to establish the program.
B. The resolution or ordinance to establish the program shall include:
1. A statement that financing qualifying improvements, to be repaid by special assessments, is in the interest of the public health, safety and welfare.
2. A statement that the local government intends to authorize direct financing between property owners and capital providers as the means to finance qualifying improvements.
3. A statement that the local government intends to authorize special assessments, to be entered into voluntarily by a property owner with the local government by means of a written special assessment agreement, as the means to repay the special assessment financing.
4. A statement that the enforcement method for a delinquent special assessment installment by a local program authority is the procedure prescribed by article 2 of this chapter and that the enforcement method for a delinquent special assessment installment by a capital provider is the procedure prescribed by section 49-1605, subsection D.
5. A statement that identifies, authorizes and directs the local program authority to do the following:
(a) Execute special assessment agreements and other documents on behalf of the local government related to project applications approved by the program administrator pursuant to this chapter.
(b) Bill and collect special assessment installments unless otherwise delegated pursuant to section 49-1605, subsection B, paragraph 2.
(c) Enforce delinquent special assessments in the manner set forth in article 2 of this chapter, unless otherwise delegated pursuant to section 49-1605, subsection B, paragraph 2.
(d) Undertake any other obligation that the local government assigns to the local program authority and any action necessary to effectuate the delegated obligations.
6. An incorporation by reference of the program guidebook and provision that authorizes the program guidebook to be amended by the local government.
7. A description of the boundaries of the region in which property owners may finance qualifying improvements.
8. A description of proposed arrangements for the duties of the program administrator.
D. A program may be amended in accordance with the resolution or ordinance that establishes the program.
49-1603. Special assessment agreements; project application; financing agreement; fees
A. Local program authorities may enter into special assessment agreements with property owners to secure special assessment financing pursuant to this chapter. Before entering into a special assessment agreement, a property owner shall submit a project application to the program administrator on a form prescribed by the program guidebook. The project application shall include:
1. Documentation as required by the program guide book that the proposed critical capital expenditure improvement meets the requirements of qualifying improvements.
2. Certification that the person requesting the proposed qualifying improvements is the property owner and that there are no delinquent taxes or assessments on the qualifying property.
3. The name of the capital provider providing the special assessment financing and the proposed terms of the financing agreement, including:
(a) The full special assessment financing amount, including any fees or costs authorized by this section.
(b) The applicable interest rate.
(c) The servicing fees paid to the local program authority or program administrator.
(d) A schedule of the special assessment installments.
(e) The number of years the special assessment will be imposed on the qualifying property.
(f) The delinquent interest rate or penalties.
(g) The conditions by which the property owner may prepay and permanently satisfy the debt owed pursuant to the financing agreement and remove the special assessment lien from the qualifying property.
B. Before entering into a special assessment agreement, the local program authority shall receive:
1. Written consent from any holder of a lien, mortgage or security interest in the qualifying property that the qualifying property may participate in the program and that the special assessment lien has priority superior to all liens, claims and titles except for general property taxes and prior special assessments.
2. Certification from the program administrator that the proposed qualifying improvements, qualifying property and property owner qualify for special assessment financing pursuant to the program.
C. Special assessment financing shall be provided by capital providers and disbursed directly by capital providers to fund qualifying improvements subject to a financing agreement.
D. Notwithstanding the obligation of the local government pursuant to section 49-1605, subsection B, paragraph 4 to remit a special assessment installment received from a property owner to the applicable capital provider, a financing agreement shall specify that the local government is:
1. Not liable in any way for the debt of the property owner.
2. Not a third-party obligor.
3. Not pledging or lending credit to the property owner or the capital provider.
4. Not liable to a capital provider for any right or cause of action for nonpayment of the special assessment financing and shall look solely to the property owner for recourse.
E. Costs capitalized into the special assessment financing principal amount may include:
1. The cost of materials and labor necessary for installing or modifying a qualifying improvement.
2. All developer, project development, engineering and review fees.
3. capitalized interest, interest reserve and other financing fees.
4. Any other fees or costs that may be incurred by the property owner and that are incident or ancillary to installing, modifying or constructing a qualifying improvement on a specific or pro rata basis.
F. A financing agreement may authorize the property owner to directly purchase the contract, including through lease or other service contract, for the installation or modification of a qualified improvement.
G. Notwithstanding the amounts retained by a local government, local program authority or program administrator pursuant to section 49-1605, a local program authority or program administrator may charge:
1. an application fee of not more than $500.
2. if the application is approved, a property owner program administrative fees that reflect the reasonable costs of the program authority or program administrator to provide administrative services under this section for the program but that do not exceed the lesser of one percent of the principal amount of the special assessment financing or $50,000.
49-1604. Special assessment; imposition; amount; collection; lien
A. On entering into a special assessment agreement, the local program authority shall record, or delegate to the capital provider to record, a notice of special assessment lien on the subject qualifying property in the county recorder's office of the county in which the qualifying property is located.
B. The recording of the notice of special assessment lien pursuant to subsection A of this section shall include all of the following:
1. The legal description of the qualifying property.
2. The county assessor's parcel number of the qualifying property.
3. The name of each property owner or party claiming a possessory interest in the qualifying property.
4. The date on which the special assessment lien was created.
5. The principal amount of the special assessment lien.
6. The term of the special assessment lien.
7. A copy of the special assessment agreement.
C. At the same time the notice of special assessment lien is recorded, the local program authority shall execute and record a notice of assignment of special assessment lien from the local government to the applicable capital provider on the subject qualifying property in the county recorder's office of the county in which the qualifying property is located. The notice of assignment of special assessment lien shall contain all of the following:
1. The grantor's name, which is the local government imposing the special assessment lien.
2. The grantee's name, which is the applicable capital provider and the capital provider's successors and assigns.
3. The date on which the notice of assignment of special assessment lien was created.
4. The amount and terms of the special assessment assigned.
D. A special assessment lien is effective for the period in which the special assessment is imposed until the special assessment is paid in full and has priority superior to all liens, claims and titles except for general property taxes and prior special assessments.
e. A special assessment lien runs with the land, and that portion of the special assessment lien that has not yet become due is not accelerated or eliminated by foreclosure of the special assessment lien or any lien for taxes or other assessments imposed by this state or a local government or district against the qualifying property on which the special assessment lien is imposed or by the foreclosure of the qualifying property.
F. On execution of a notice of assignment of special assessment lien, the applicable capital provider shall have and possess the delegable powers and rights at law or in equity as the local government would have if the special assessment had not been assigned with regard to:
1. The precedence and priority of the special assessment lien.
2. The proceeds of special assessment installments.
3. Accrual of penalties and fees related to the special assessment.
G. The assignee of a special assessment enforced by the local government pursuant to section 49-1605, subsection B, paragraph 2 has the right to enforce the special assessment and special assessment lien pursuant to section 49-1605, subsection D.
H. When the underlying special assessment financing has been satisfied, the applicable capital provider shall notify the local program authority and the local program authority shall record a release of the special assessment lien by the local government.
49-1605. Special assessment; collection; enforcement
A. Special assessments shall be collected in installments at such times and pursuant to the terms of the special assessment agreement.
B. Special assessment installments due under this chapter shall be billed and collected as follows:
1. The local program authority may bill, collect and enforce the special assessment installments.
2. The local program authority may execute a notice of delegation of authority to assign the billing, collecting and enforcing special assessment installments to the capital provider. The notice of delegation of authority shall be:
(a) Attached to the notice of assignment of special assessment lien at the time of the notice of assignment of special assessment lien.
(b) Be substantially in the following form: "By virtue hereof, I (name of local program authority), by virtue of the authority vested in me as said local program authority, do authorize and empower (name of capital provider), the capital provider's agents or assigns, to demand and receive the assessment hereto attached, and to enforce the special assessment pursuant to section 49-1605, subsection D, arizona revised statutes, and this shall be the delegation for the same."
3. The procedures for billing and collecting will be as described in the special assessment agreement.
4. Special assessment installments collected or received by the local program authority shall be held in a segregated account and remitted to the applicable capital provider.
5. Delinquent special assessment installments shall incur interest and penalties as specified in the financing agreement.
6. The local government and the local program authority shall provide in the special assessment agreement for the payment of the local program authorities' collection expenses directly related to the special assessment installments. The expenses must be included as additional amounts added to the special assessment installment amounts and be directly related to the actual expenses of collecting the special assessment installments. The local program authority may impose an additional surcharge of not more than twenty-five percent of the fee charged for furnishing a copy, printout or photograph.
C. If a local program authority is billing and collecting special assessment installments pursuant to subsection B, paragraph 1 of this section, in the event of a nonpayment of a special assessment installment, the local program authority, on or before one year after the date on which the special assessment installment became delinquent, shall collect the delinquent special assessment installment pursuant to article 2 of this chapter.
D. If the local program authority fails to collect the delinquent special assessment installment pursuant to article 2 of this chapter or has executed a notice of delegation of authority to the capital provider, at any time after one year after the date of delinquency of an unpaid special assessment installment, and without waiving any other available relief, the capital provider may initiate a suit for foreclosure against the property owner of the qualifying property to recover all delinquent special installments and any interest and penalties specified in the financing agreement. The suit for foreclosure shall follow the procedures for judicial foreclosure of a mortgage under title 33, chapter 6, article 2. The portion of the special assessment lien that has not yet become due is not accelerated or eliminated by foreclosure of the special assessment lien. the remedies in article 2 of this chapter do not apply to a foreclosure initiated by a capital provider pursuant to this subsection.
ARTICLE 2. DELINQUENT INSTALLMENTS
49-1611. List of delinquent installments; notice; sale of delinquent property
A. Within twenty days after the date of delinquency, the local program authority shall prepare a list of the special assessments on which any installment is delinquent. The list shall contain:
1. A description of each parcel of qualifying property and the name of the property owner as stated in the special assessment.
2. The amount of the delinquent special assessment installment and penalties and costs due, including the cost of advertising.
B. The local program authority shall notify the property owner that unless each delinquent special assessment installment and the penalties and costs due are paid, the qualifying property on which the special assessment is a lien will be sold at public auction at the time and place specified in the notice. At least ten days before the date of the sale, the notice shall be mailed to the property owner of the qualifying property or parcel on which a special assessment installment is delinquent at the address shown on the most recent property tax roll.
C. The time of the sale may not be less than ten days after the notice is mailed. The place of public auction shall be in or in front of the office of the local program authority, or at the place otherwise designated in the notice.
49-1612. Payment after delinquency and before sale
A. At any time before the sale of any qualifying property subject to a delinquent special assessment installment, any party having an interest in the qualifying property may pay the delinquent special assessment installment on the qualifying property together with the penalty and costs due, including the cost of advertising.
B. On payment pursuant to subsection A of this section, the local program authority shall note in the record the date of payment, the name of the person by or for whom the payment is paid and the amount paid.
49-1613. Notice to lien claimants
A. Before the date fixed for the sale or before the date to which the sale has been postponed, the local program authority shall obtain a record search that shows the names and addresses of record of all lien claimants on, and other persons with an interest in, all properties or parcels on which a special assessment installment is delinquent. The cost of a record search may be added to the special assessment and is deemed to be a portion of the delinquent special assessment installment.
B. At least ten days before the sale date or the date to which the sale has been postponed, the local program authority shall mail a notice of the date and place of the sale or postponed sale to the property owner and to each of the lien claimants and other persons with an interest as shown by the search of records. The notice shall state:
1. The date of the sale, the amount of the delinquent special assessment installments, including penalties, costs of advertisement and costs of the record search.
2. That the whole amount of the special assessment installments and costs and penalties are due at the time of the sale.
3. That, unless redeemed within the time allowed by law, a deed will be delivered to the purchaser and the deed shall convey title to the lands described in the deed free and clear of all interests and liens, except for the lien for general property taxes and prior special assessments, including special assessment lien for the unpaid portion of the special assessment imposed pursuant to this chapter.
C. A final sale may not be held unless the local program authority has provided notice by mail as prescribed by this section to all lien claimants and other persons with an interest as shown by the search of records. The mailing may occur either before the date originally set for the sale or before the date of any postponed sale, and only one mailing and one record search are required.
49-1614. Sale procedure
A. On the date set for the sale, the local program authority shall at ten a.m., or any time thereafter to which the sale may be adjourned, begin the sale of the qualifying property advertised. The local program authority may postpone or continue the sale from day to day until all the qualifying property is sold. Each qualifying property separately assessed shall be offered for sale separately. The sale shall be for the delinquent special assessment installment, and not for the entire assessment.
B. If there is not a purchaser for any qualifying property offered for sale, the qualifying property shall be struck off to the capital provider as the purchaser if all outstanding taxes and prior assessments are paid by the capital provider. The capital provider may sell any qualifying property, so purchased after the expiration of the time for redemption pursuant to section 49-1616, at public or private sale.
C. All proceeds of a sale of the qualifying property or purchase of a deed pursuant to this section related to a delinquent special assessment installment shall be remitted to the applicable capital provider, except the local program authority shall retain the actual and reasonable costs the local program authority incurred to enforce a delinquent special assessment installment.
49-1615. Certificate of sale; lien record
A. After making the sale, the local program authority shall execute, in duplicate, a certificate of sale stating the description of the qualifying property sold, the name and address of the property owner and all lien claimants as shown by the record search prescribed by section 49-1613, that the qualifying property was sold for a delinquent special assessment installment, specifying the improvements for which the special assessment was made, the amount for which the qualifying property was sold, the date of the sale, the name of the purchaser and the first date on which the purchaser may apply for a deed. The local program authority shall file one copy of the certificate in the local program authority's office and deliver the other to the purchaser.
B. On filing the copy of the certificate in the office of the local program authority, the lien of the delinquent special assessment installment shall vest in the purchaser and is only divested by a redemption of the qualifying property as provided by this article. This subsection does not extinguish or change the lien for the remaining special assessment installments.
C. The local program authority shall also enter on the record of the special assessment installment lien, opposite the description of each qualifying property offered for sale, a description of the part thereof sold, the amount for which the qualifying property was sold, the date of the sale and the name of the purchaser.
49-1616. Redemption
A. Redemption may be made by any party having an interest in the qualifying property at any time before the execution and delivery of a deed for the qualifying property by paying to the local program authority the amount for which the qualifying property was sold and five percent thereon if paid within three months from the date of sale, ten percent if paid within six months, twelve percent if paid within nine months, fifteen percent if paid within twelve months or twenty percent if paid at any time after twelve months from the date of sale.
B. When redemption is made, the local program authority shall note that fact on the duplicate certificate of sale in the local program authority's office and deposit the amount paid with the capital provider. The capital provider shall credit the purchaser named in the certificate of sale with the amount paid and pay the sum to the purchaser or the purchaser's assignee on the surrender of the certificate of sale.
49-1617. Failure to redeem; notice; affidavit; execution of deed
A. Twelve months after the date of sale, the local program authority shall execute to the purchaser, or the purchaser's assignee, on application, if the purchaser has fully complied with the provisions of this section, a deed to the qualifying property sold in which shall be recited substantially the matters contained in the certificate, any assignment thereof, and that no person has redeemed the qualifying property. The local program authority shall receive from the applicant for a deed $1 for making the deed.
B. The purchaser, at least thirty days before applying for a deed, shall mail to the property owner, all lien claimants of record, all persons of record with an interest in the qualifying property and, if occupied by a person other than the property owner, to the occupant of the qualifying property, a written notice that the qualifying property, giving the description, has been sold for a delinquent special assessment installment, specifying the improvements for which the special assessment was made, the amount for which the qualifying property was sold, the amount necessary to redeem at the time of the notice, the time when the purchaser or assignee will apply to the local program authority for a deed and that, on issuance of the deed, all interests in the qualifying property, whether of record before or after the delinquent assessment lien, will be extinguished, except for the lien for general property taxes and prior special assessments, including the unpaid portion of the special assessment imposed pursuant to this chapter. If the property owner cannot be found after due diligence, the notice shall be posted in a conspicuous place on the qualifying property at least thirty days before the time stated in the notice of the application for a deed.
C. The applicant shall file with the local program authority an affidavit showing that notice of the application has been given, and if the mailed notice was returned to the sender, that due diligence was used to find the property owner. If redemption of the qualifying property is made after the affidavit is filed, and more than twelve months from the date of sale, the person making the redemption shall pay, in addition, for payment to the purchaser, $10 for the service of notice and the making of the affidavit.
D. The deed of local program authority is prima facie evidence of the truth of all matters recited in the deed, and of the regularity of all proceedings before the execution of the deed and of title in the grantee. The deed of the local program authority shall convey to the purchaser fee title to the lands described in the deed, free and clear of all interests, liens, claims and encumbrances whether of record before or after the special assessment lien, except for the lien for general property taxes and prior special assessments and the special assessment lien for the unpaid portion of the special assessment imposed pursuant to this chapter.
49-1618. Proof of notice; affidavit; validity of notice; costs; definition
A. Unless otherwise provided by this chapter, proof of mailing, of publishing or of posting the notices required by this article shall be made by affidavit of the person required to mail, publish or post the notice. The affidavit shall:
1. State the manner of mailing, publishing or posting the notice.
2. State the date the notice was mailed, published or posted.
3. Have attached to the affidavit a copy of the publication or notice that was mailed or posted.
4. Be filed in the office of the local program authority.
B. An affidavit prepared pursuant to this section is prima facie evidence of the posting, publishing or mailing described. The failure of any person to receive a mailed notice does not affect the validity of any notice that was mailed as prescribed by this article. The failure to mail a notice to one or more persons does not affect any notices mailed to other persons. An error or informality in a notice does not invalidate other portions of a notice.
C. The costs of mailing and publishing provided in this section are a valid incidental expense pursuant to this chapter.
D. Notice served on a married person is deemed notice on the person's spouse, notice served on guardians and administrators constitute notice to heirs and wards and notice served on an attorney-in-fact constitutes notice to the attorney's principal.
E. For the purposes of this section, "mail", "mailed" or "mailing" means deposit of the notice or document with the United States postal service first class postage prepaid.
