Last November, a private street in San Francisco’s upscale Presidio Terrace neighborhood was returned to the homeowners association after a tax sale in 2015, according to Joyce Cutler in the Daily Tax Report: State (subscription required). The conflict came to a head before the San Francisco Board of Supervisors, which voted 7–4 to cancel the sale. The homeowners association argued that nearly 20 years of tax notices were sent to the address of its deceased accountant, who at the time of his death was no longer its representative. However, that address was the one on record with the San Francisco Treasurer & Tax Collector. The purchasers filed a suit in December 2017, which will begin court hearings next week. For anyone wondering how the sale of a private street occurs or for that matter, any other tax sale involving private property, states’ property tax codes typically outline the procedural steps involved before property can be lawfully transferred to a tax-sale purchaser. Generally, tax sale procedures will vary widely from state to state.
California, for instance, regulates tax sale procedures from the notice of impending default through the tax sale itself, in the revenue and taxation code provisions. One section of the code requires that a tax collector make reasonable efforts to find the address of the last assessee of the tax-defaulted property. There are variations on what steps the tax collector must take to notify property owners regarding vacant properties versus occupied properties. District Eight Supervisor Jeff Sheehy, who voted in favor of returning the property to the homeowners association, states that, “'considerably more effort should be made to contact the owner,’” according to Curbed SF.
In Maryland, the notice of sale has to be mailed at least 30 days before the property is sold, to any individual listed as the property owner on record for the last 25 years. Generally, the tax collector must sell the property no later than two years from the date the tax became delinquent. However, local laws may shorten this requirement even further, like in Calvert County, where the collector must advertise and sell any real property after the tax has been delinquent for only one year.
In other jurisdictions, like Massachusetts, notice requirements are seemingly less stringent. Unlike California or Maryland (where the procedure is outlined in the tax code), Massachusetts cities and towns may pass an ordinance expressly authorizing the collector to use tax sales to enforce property tax liens as a means to recover delinquent property taxes. However, if there is no such ordinance established as an enforcement mechanism, the collector can choose to conduct a tax sale at his or her discretion. If the tax collector choses to exercise this option, he or she must give notice by publication containing information on the time and place of sale of the property.
As the Presidio Terrace street case heads to court next week, both the homeowners association and purchasers will be eagerly awaiting the court’s interpretation of whether the tax collector made reasonable efforts to notify the homeowners of the delinquent property taxes. It will be interesting to see how the court strikes the balance between the homeowners association’s procedural rights to notice and the purchasers’ rights to rely on the tax sale process.
Continue the discussion on Bloomberg Tax’s State Tax Group on LinkedIn: What should be the minimum requirement for notice prior to a tax sale? Which party do you think the court should side with?
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