Last week, a San Francisco couple made news after it was discovered that they had purchased a private street, Presidio Terrace, at a public tax sale. The property was auctioned off after outstanding taxes, penalties, and interest had accumulated, resulting in an outstanding balance of $994 (about 30 years’ worth of unpaid taxes). At the sale, the couple successfully outbid other potential buyers, acquiring the street, sidewalks, parking spaces, and other common areas for $90,100, according to the San Francisco Chronicle.
The street’s residents and the Presidio Homeowners Association were surprised to learn of the sale two years after it took place,  leaving some to wonder how the pair stealthily snagged the entire street. The answer, of course, lies in the tax code.
In California, there are procedural steps that a taxing authority must take before property can be sold at a public auction to recover delinquent taxes. The process begins with a notice to the delinquent taxpayer stating that the property is in default and may be sold. The tax collector must record this notice in the appropriate county and then take steps to try to sell the property within four years.
When a sale date is established and the proposed sale has been approved,between 45 and 120 days before the sale, the tax collector must notify the delinquent taxpayer of the date of the sale at their last known address. Additionally, the tax collector must publish notice of the sale in a county newspaper for three weeks prior to the sale date. Under California law, as long as the tax collector makes a “reasonable effort” (for those who recall their law school days, “reasonable” can be subject to various interpretations) to ensure that the notice of the sale date is properly mailed to the defaulting party, the sale will be deemed valid, even if the notice does not reach the intended recipient—herein lies the battle.
Despite acknowledging that it was unaware of its tax obligations, the Association claims that the sale should be rescinded because the tax collector’s efforts to notify them were unreasonable, implying that the taxing authority should have known that the tax bill was being sent to the wrong address all along. According to the Association’s complaint, the City of San Francisco had been sending the tax bill to an address “associated with an accountant who last performed work for the Association in the 1980s.” The Association goes on to allege that statutorily required notices of default and sale were not delivered because the notices went to the wrong place.
Assuming that the Association is within the statute of limitations allowing it to challenge the sale, before it could seek relief in court, it must first pursue a rescission of the sale before the same Board of Supervisors that approved the sale. According to the Association’s complaint, however, as of July 17, 2017, requests to have the sale rescinded have remained unanswered, leading the Association to include claims that its due process rights have been violated in its court.
As if the tax sale process isn’t difficult enough, it appears that this matter is only going to get more complicated, with the couple who purchased the street contemplating charging rent for parking spaces. However, this should be a lesson to all taxpayers that, at minimum, it is worth taking the time to ensure that the local tax assessor’s office has the correct mailing address.
Continue the discussion on Bloomberg BNA’s State Tax Group on LinkedIn: Are you familiar with your state’s tax sale procedure? Did the tax collector act reasonably in this case?
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 Under Cal. Rev. & Tax. Code §3691(a)(1)(A), residential tax-delinquent property is subject to sale five years after default. Commercial tax-delinquent property may be sold three years after default.
 According to the Association’s complaint, the tax sale actually occurred in April of 2015, but the Association learned of the sale in March 2017.
 See Cal. Rev. & Tax. Code §3725 (requiring claims to invalidate sales be brought before the board one year from the date that the tax collector recorded the tax deed); see also Cal. Rev. & Tax. Code §3731.
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