For Sale: Boarded-up, crumbling former corner store assessed at $5,000. Price: $1.76 million

For 30 years, the city has tried to collect the growing debt of John Stevens.

Stevens is listed as the owner of 2032 Penrose Ave., a boarded-up old corner store with a bay window on the second floor and a pile of junk in the backyard. Officials say the money he owes for taxes, water bills, fines, fees and interest on the property has grown to $1.76 million.

Stevens has been dead since 1989.

The crumbling, century-old building he owned in West Baltimore is one of at least 15 properties on the city’s tax sale list that have accrued more than $1 million in debt over the past decade.

These million-dollar vacants are the most extreme examples of a far more widespread problem: Thousands of properties in Baltimore are encumbered with liens for more than they’re worth. In many cases, far more.

And that makes them zombies, empty, abandoned and unattractive to developers, contributing to the blight that plagues the city.

State Sen. Bill Ferguson says the phenomenon shows that the challenge of healing the city landscape is more complex than simply trying to draw investors to its troubled areas.

“There are lots of links in the chain that create vacancy and neighborhood decay that are unrelated to just the marketplace overall — that, in fact, contribute to market failure,” the Baltimore Democrat said.

Ferguson serves on a state work group studying tax sales across Maryland.

One way the city tries to recover unpaid taxes, water bills and other debts is to place liens on properties and sell them. Investors purchase the liens for the amount that’s owed, satisfying the city’s debt, and then seek reimbursement directly from the property owners, with interest. When owners don’t pay, lienholders may take possession of properties through foreclosure.

But the process works only when the price is right. There’s no profit in buying a lien for more than a property is worth.

The debts trap the properties in a state of perpetual vacancy. Owners have died or abandoned the property, and the unpaid bills must be settled before the properties can be sold. So they cycle on and off the city’s annual tax sale list, unwanted and unpurchased.

At the most recent tax sale, in May, the city offered liens on 1,400 such properties, with debts totaling $137 million. The city sold 16, bringing in $50,000.

A group commissioned by the Rawlings-Blake administration last year to study the tax sale system concluded that it helps keep as many as 4,000 houses vacant. The nonprofit that conducted the study recommended overhauling the system.

The city sold 7,696 total liens in this year’s auction. City Finance Director Henry Raymond says the annual sale brings in millions of dollars in revenue and helps cut down on blight.

“What we want to do is take those abandoned or vacant properties, put them back into productive use,” he said.

He says the city keeps liens on abandoned properties on the books in hopes that someone, someday might pay them off.

“Liens have no statute of limitations,” he said. “We maintain it because at some point, there may be an opportunity to recover the value of the liens or we may be able to negotiate the liens based on a potential investor.”

‘Breeding ground for rats’

Anthony Moore stands in the vestibule of his well-maintained rowhome and guides a couple of delivery men carrying a new stove up several steps.

Moore lives four doors up from the vacant property at the corner of Penrose Avenue and N. Pulaski Street. Vines cling to the red brick of the former corner store; a cornice hangs precariously from the roof. The onetime entrance is marred by rust stains and peeling paint. The gulf left by a missing front step has become a repository for trash. The backyard is littered with old mattresses, broken doors, chairs and a television set.

Moore has lived in his house, appraised at $15,000, for about five years. Over that time, he says, the old corner store has fallen deeper into disrepair. He says it needs to be demolished and the property fenced off.

“It’s a dumping field and a breeding ground for rats,” he said.

And it is dragging down the value of his property, he said, despite its “ridiculous” $1.76 million price tag. The old store and an adjoining house were appraised last month at $5,000.

Phyllis Weinstein remembers the property in its heyday. Her grandfather Reuben Rosenthal rented the building some 60 years ago for his Rosenthal Food Market, selling household staples such as milk, bread and eggs. The family lived upstairs.

“I have so many wonderful memories as a kid,” said Weinstein, of Pikesville.

Records give few clues about the property before or after that. A classified advertisement in a 1965 edition of The Baltimore Sun, after Rosenthal closed his market, shows an attorney’s sale for the “desirable 2-story brick store and dwelling.” It is unclear when Stevens bought the property.

City records do provide some clues as to how the debt got so big. The lien record for 2032 Penrose shows dozens of open bills: a current $635 water bill and $117 due in taxes for July 1 to June 30, 2018. Other bills are for $655 in 2010 to “clean and board where necessary,” $336 in 2012 to “clean where necessary” and $182 to “clean where necessary” in 2015.

Other members of the million dollar vacant club include an empty lot on North Fulton Street with a lien of almost $1.9 million, the most in tax sale records; its owner is believed to be dead. A mural dedicated to Freddie Gray overlooks the lot. People have worn a footpath cutting through the lot to Presbury Street.

A few blocks south on West Lanvale Street stands another million-dollar property: A rowhouse that looks like any other Baltimore vacant, but for the tree bursting through the kitchen ceiling.

Lloyd Holcomb sat on the stoop next door. Informed of the debt, he turned to friends in amazement.

“I live next to a million dollar crib,” Holcomb said.

The house is owned by a company called City of Baltimore Rehab Associates. John Beers, a retired Baltimore County lawyer listed as the company’s agent, said he didn’t recall anything about the property, and asked how the city could have concluded its debts totaled more than $1 million.

“The million dollars is just some kind of scare tactic,” he said. “There’s no way in the world there's a million dollars owed on that property.

“If so, there's something that's way wrong with the process.”

Catherine Mwimbi, a retired daycare worker, sat on her stoop on North Mount Street and looked across the street at a block of grassy lots where houses once stood. Number 13 has a $1 million lien.

Mwimbi said she thought the owners had walked away so the city should give up trying to collect the debts.

“If there ain’t nobody paying for it, give it away,” she said.

Efforts to reach the owners of record for the property were unsuccessful.

Investor Ned Carey has made a career of identifying properties in the tax auction, buying the liens, foreclosing on them and selling them to developers. He calls himself a vulture, cleaning up rotten messes, but the huge liens on many of the properties mean they’re too rotten even for him.

Carey said even a single $1,500 fine for not filing an annual vacant building notice can turn a viable investment toxic. Once a property falls too deeply into debt, he said, it’s likely to linger on the auction list for years.

It’s simple, he said: “It wasn’t worth the taxes last year, it wasn't worth the taxes two years ago, it wasn't worth the taxes three years ago. So why would I buy it this year?”

When private investors are unwilling to step in, there is another option: The city can foreclose on the property itself. That’s what happened in the case of 1303-1309 N. Monroe Street in 2014. The vacant lot was owned by a Baptist church; the church owed $1,106,082.85.

Anthony White owns a car wash next to the lot on the western edge of Sandtown-Winchester, and he uses part of it as extra space for his business. White says he’s kept weeds under control, and wants to participate in the city’s Adopt-a-Lot program.

“I’ve been looking after it ever since I’ve been here,” he said.

The city files about 80 foreclosure cases a year, court records show. At that rate, it could take 50 years to acquire every vacant with more debt against it than it’s worth.

Housing officials say they use foreclosures to acquire properties for demolition or to sell to an interested party, such as a developer who is looking to assemble a block of land for a future project. The city owns the property in the 1300 block of N. Monroe Street, but it is not under any lease agreement. Officials did not provide further information about the lot.

Seeking some change

Momentum is building for changes to the system.

The nonprofit Center for Community Progress, working with Baltimore officials, said in a report last year that the city’s tax sale system is blocking the development of blighted neighborhoods by locking thousands of properties in a state of limbo.

The city finance department asked the nonprofit to work with the Baltimore City Tax Sale Work Group, a collaboration of developers, nonprofit advocates and city officials who have studied the city’s tax sale process for about four years.

“We know we need a new system,” said Dan Ellis, director of the nonprofit Neighborhood Housing Services and a member of the work group. “The current system is broken by pretty much everyone’s account.”

Tax sales are part of a collection system dating back at least to the 19th century in Baltimore and beyond. More recently, some cities have moved away from the tactic.

In Pittsburgh, for example, officials stopped selling taxes liens because, they said, it put a third party between the city and potential developers. Now, the city offers hardship plans to vulnerable residents and has hired a third-party debt collector to seek back taxes and government citations. The city still auctions off delinquent properties to interested, qualified buyers. A parallel process allows community development organizations to request properties for redevelopment, and allows homeowners adjacent to vacant land to purchase it as extra yard space.

Officials in Rochester, N.Y., have switched from a traditional tax lien sale and foreclosure process to a hybrid approach. Before the city sells tax liens to a third party, officials ask the community to identify properties to be withheld for local redevelopment and blight reduction. The city may then foreclose on those properties to force changes in ownership. Special attention is paid to owner-occupied homes to help property owners redeem the debts.

By the strictest definition, Baltimore has about 16,000 vacant houses, but some counts put the number of unoccupied houses as high as 40,000.

The city’s Vacants to Value program uses demolition, individual rehabilitations and broader redevelopment projects to bring old houses and buildings back into productive use. Some have called for different solutions, such as land banks to create a permanent stock of affordable houses, or programs that would allow homeless individuals to fix up old houses and keep them.

In Baltimore, the Center for Community Progress, the group commissioned by the Rawlings-Blake administration, recommended wholesale changes to the tax sale system. Instead of selling liens to investors, the report’s authors said, the city should set a date by which property owners would have to either pay off past due debts or enter a payment plan.

If an owner missed the deadline, officials would foreclose on the property and auction it off. If no one bid on it, the city would assume ownership and work to get the property in the hands of a new owner or create a land bank to take control.

The authors also said low-income homeowners should get special protections. They should be given more notice than other property owners, and a chance to enter a financial hardship program. They said the city should also do more to help the vulnerable homeowners enroll in programs that provide financial aid or tax credits to help them avoid falling into debt.

The researchers said those steps would stop the recycling of the “substantial ‘shadow’ inventory of vacant and abandoned properties through the tax sale.”

Short of an overhaul, the authors said, the city could reduce the lien amount on the properties to totals that do not exceed fair market value, enticing more investors.

Kim Graziani, a vice president at the Center for Community Progress, says the changes the group recommended would help the city control blight while also bringing in revenue. As it is now, she says, investors are buying liens on the properties for which owners are most likely to pay off their debt.

The city “charged us with helping to think through how to create a tax enforcement system that focuses on maximizing revenue,” she said. “And to think through a system that reduces vacancy and abandonment and how to create a system that protects vulnerable occupants.

“Baltimore City’s current system is neither equitable nor efficient.”

Next steps

The work group created by the General Assembly this year is considering changes to the tax sale rules. State Sen. Adelaide Eckardt, one of the panel’s chairs, said one of its focuses will be finding ways to ensure vacant properties that go through tax sale end up being used productively.

“Ultimately what we want to do is get those properties moving,” the Eastern Shore Republican said.

For 61-year-old Deborah McCracken, the way the city decides to deal with the problem of the million dollar vacants is of key importance.

Her tidy West Baltimore rowhouse, a half-block from the corner store on Penrose, has a set of the city’s quintessential white marble steps, a security door with intricate metalwork, and “For Sale” signs on the windows and door. A resident of 50 years, McCracken said she wants to sell her house for $62,000, but she’s afraid the old store is causing potential buyers to overlook the deck she added and the special features inside, such as a new breakfast bar and renovated bathrooms.

“It’s dilapidated. There’s no windows. It’s a mess,” she said. “If they’re not going to fix it, they need to tear it down.

“It’s just an eyesore.”

Baltimore Sun research librarian Paul McCardell contributed to this article.

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