After Post Investigation, City Cancels 2013 Tax Lien Sales
How's this for a Friday news dump? Less than a week after the Washington Post started its series on problems in the Office of Tax and Revenue's tax lien sales, Mayor Vince Gray and Chief Financial Officer Natwar Gandhi announced the cancelation of 2013 tax lien sales on around 142 homes.
The cancelation will apply to liens for buildings that receive a "homestead deduction"—meaning they're occupied by their owners and the foreclosure process that could take away their homes hasn't started yet. Gray spokesman Pedro Ribeiro says the 142 lien cancelation's are expected to cost "a few hundred thousand" dollars, but less than a million. Lien sales from previous years that are headed toward foreclosure will also be examined for potential cancelation.
"While these properties will be saved from the possibility of imminent foreclosure, the homeowners will still be required to pay the taxes and interest owed on the property," the release reads. "Most importantly, they will be able to stay in their homes."
Gray's release also details the tax sale legislation he's planning to send to the D.C. Council Monday. The legislation will include a $2,200 cap on legal fees that tax lien purchasers can charge to homeowners and the creation of an independent "Real Property Tax Ombudsman" separate from the Office of Tax and Revenue. Properties that qualify for the homestead deduction would also be ineligible for tax lien sales until they reached $2,500 in unpaid taxes. OTR would also be able to initiate payment plans with delinquent taxpayers.
Gray's press release:
(WASHINGTON, D.C.) – At the initiation of Mayor Vincent C. Gray, he and Chief Financial Officer Natwar Gandhi have ordered the cancellation of the 2013 tax-lien sales for all properties receiving the Homestead Deduction (those properties owned and occupied by the homeowner and where foreclosure proceedings have not yet commenced). The Mayor has also established the office of a Real Property Tax Ombudsman, who will work in the Executive Office of the Mayor to provide counsel to those residents needing assistance and directing them to appropriate resources.
The Mayor has also directed the Office of the Attorney General and the Office of the Deputy Mayor for Health and Human Services to examine all of the pending foreclosure proceedings stemming from prior years’ tax-lien sales involving the primary residences of taxpayers to determine if any of those sales should be cancelled prior to the final order of foreclosure. The Mayor will also introduce legislation when the Council returns next week improving the process for tax-lien sales, which, if enacted, will ensure a more fair and effective process when the sales resume next summer.
“Last Sunday, when I first learned from a Washington Post article about the problem of vulnerable District homeowners losing their homes through tax-lien sales, I was appalled by the injustices cited and immediately began pursuing potential remedies,” Mayor Gray said. “The actions that Dr. Gandhi and I have taken today will ensure that, from this point forward, no District residents whose property has been sold at a tax-lien sale will be at risk of losing their homes through this process if they have extraordinary circumstances that warrant a re-examination of their cases.”
Dr. Gandhi said, “The Mayor and I are committed to working together to ensure the most fair and effective tax-sale process.”
The cancellation order means that the District will step in and redeem the properties from the tax-sale purchasers. Approximately 142 owner-occupied properties from the recent July 2013 tax sale will be affected. While these properties will be saved from the possibility of imminent foreclosure, the homeowners will still be required to pay the taxes and interest owed on the property. Most importantly, they will be able to stay in their homes.
“What quickly became clear to me is that we needed to appoint a District Real Property Tax Ombudsman, whose focus is constituent services and who is independent from the CFO’s Office of Tax and Revenue (OTR),” Mayor Gray added. “The Real Property Tax Ombudsman will be the person our citizens can call if they need assistance in property-tax matters with OTR, and the ombudsman can coordinate with our District agencies and non-profit partners to get vulnerable residents the assistance they need in navigating and understanding the tax process.”
The Mayor has already begun the search for a Real Property Tax Ombudsman and will submit a reprogramming to fund the office as soon as the 2014 fiscal year begins on October 1, 2013. The Ombudsman will be available to assist District homeowners with issues relating to tax sale and other real-property matters, and to refer the homeowners to the proper legal-services providers, public service organizations, and other District entities to assist the homeowner.
The Mayor will introduce permanent legislation when the Council returns from its summer recess on Tuesday, September 17, 2013. This legislation will provide a series of recommendations on how to reform the tax-lien-sale process.
Mayor Gray explained: “The legislation I will introduce on Monday will reform the tax lien sale process by: expanding required notice to homeowners of their rights and alerting them to resources that are available to assist them, including the Real Property Tax Ombudsman; setting a cap of $2,200 on the legal fees that tax sale purchasers may collect; increasing the minimum threshold for tax sale to a debt of $2,500 for properties receiving the Homestead Deduction; sending copies of the notices to property owners to alert them to the tax delinquency and the pending tax sale to the Real Property Tax Ombudsman, who will be able to reach out to homeowners and provide assistance as needed; and giving OTR the authority to negotiate and enter into deferred-payment plans with homeowners on real-estate taxes in order to accommodate owners with limited means.
The tax-lien-sale process, as improved by the Mayor’s proposals, is still necessary to ensure that a limited subset of District residents pay their taxes, similar to the process in place in all 50 states.
“I encourage the Council to hold a public hearing on my legislation and work collaboratively with me and interested public stakeholders before the next tax-lien sale,” the Mayor added. “This will allow us to develop a well-thought-out and workable solution that protects both vulnerable District homeowners and the District’s tax revenue.”
Photo by Darrow Montgomery