Lien sales will provide additional revenue for City and School District, provide protections for property owners and limit fees charged by third parties.
Philadelphia City Council today passed important legislation introduced by Councilmembers Bill Green, David Oh, Brian O’Neill, Bobby Henon, Jim Kenney and Mark Squilla encouraging the Administration to begin sales of tax liens on delinquent real estate accounts and providing important citizen-oriented protections.
“This is an important tool that we have to both raise additional funds for the City and School District,” Councilman Green (D – At Large) said. “Using tax lien sales, we can bring in an additional $50-60 million in revenue for the City and School District.”
The recent PEW report on the City’s tax delinquency situation indicated that up to $155 million, or 30% of the estimated $515.4 million in delinquent real estate taxes is collectable over the next few years if the City takes advantage of all of the tools available to increase collections.
“Lien sales can help us end our City’s unfortunate culture of non-compliance,” Councilman Henon (D – 6th) said. “People have a responsibility to pay their taxes and we have a responsibility to make sure our City and schools get the funds they are entitled to.”
Tax lien sales are authorized under State Law. Delinquent tax accounts are offered for sale to third-party investors who pay the delinquent account, providing immediate revenue for the City. The investors are then responsible for collecting the taxes due from the property owner. The bill officially authorizes the Department of Revenue to begin transferring the liens on accounts that have not entered into a payment agreement or settled their accounts after the first year. The bill also sets certain terms and conditions covering fees and charges the third-party investor can apply to the lien.
Specifically, the bill:
1) prohibits sales of claims valued at less than $1,000
2) requires a right of first refusal to any existing third party assignee of real estate tax claim
3) caps attorneys fees at $200/hour and $2,500 total
4) caps interest rates charged by lien holders at 10% and penalty rates at 5%
5) requires a two year waiting period from purchase of the lien before foreclosure on Homestead Properties
The Department of Revenue would be able to adjust fees and charges a lien holder may collect by regulation. Revenue Commissioner Clarena I.W. Tolson testified in favor of the measure in the Finance Committee hearing on the bill.
The bill passed Council on a vote of 15-2. If signed by the Mayor, the measure takes effect on November 15, 2013.