Real Estate

City to host sale of back taxes amid concern about vacants

The city will conduct its annual tax sale this month in an effort to boost tax rolls, but some critics say it's a quick fix that contributes to one of Baltimore's most entrenched problems — vacant properties.

City officials scheduled about 10,000 tax liens to go to auction this year. That's a small fraction of the 240,000 properties that owed money on property taxes or other city bills as of July 1, and less than half of the roughly 23,800 listed in advertisements in March. Those properties represented about $125 million in unpaid bills.


"I think the city does well," said Janice J. Simmons, chief of the Bureau of Revenue Collections. "Tax sale is a useful hammer in enforcing collections for the city."

Last year, the city took in $37.5 million from bidders for about 6,000 properties. Lien investors pay off the debt to the city but then can seek repayment from the property owners, plus 18 percent interest and legal fees. Lien purchasers also have the right for two years to foreclose on a property as a way to force the property owner to pay.


But many lien investors aren't interest in acquiring properties via foreclosure. Nationwide, less than one-half of 1 percent of properties with liens acquired by investors actually change hands, according to Brad Westover, executive director of the National Tax Lien Association. In the city, Simmons said, investors rarely take control of the properties.

Some attorneys said this can create situations in which property owners unable to pay bills abandon the houses, but the deeds never change hands.

"The idea is that it clears title and it's a way for cities to collect taxes, kind of privatize their tax collection, and then a new owner would get a clean title at the end of the day, but what we're finding is it actually has the opposite effect," said Robin Jacobs, a staff attorney at the Community Law Center. "It clouds the title. The city does still get its taxes at the beginning of the day, but it leads to a vacant property that becomes a problem."

Questions about the tax sales are not new. A Department of Justice investigation of bid-rigging between 2002 and 2007 resulted in multiple convictions and admissions of guilt. In 2012, the City Council proposed barring sales of liens imposed because of unpaid water bills. (About 1,440 properties were on the list this year because of unpaid water bills.)

Advocates also have pushed for the state to set limits on the legal fees that attorneys can charge homeowners to release the debt. They've also sought to protect property owners by increasing the amount of money owed to a municipality before it can sell a tax lien.

In Maryland, unpaid bills as low as $250 can result in a tax sale. In New York City, by contrast, the minimum is $1,000 for single-family homes, with exemptions for qualified seniors, disabled people and veterans.

"I think there just needs to be a change in thinking about the process, and maybe if everybody can get together and talk to each other, maybe there will come some realization that something needs to change," said Louise Carwell, senior attorney for consumer law at Maryland Legal Aid, who joined an informal task force Jacobs organized to examine the tax sale system and recommend reforms.

The city is participating in the task force, said Julie Day, deputy commissioner of land resources for Baltimore Housing. The Abell Foundation also has commissioned a study of the city's tax lien procedure and how it compares to other places.


It's not clear how many properties end up in limbo — abandoned by their owners but not acquired by the lien holders — because of tax sales, Jacobs said.

The Center for Community Progress, a think tank focused on the problem of vacant properties, said the situation can contribute to neighborhood decline, citing its survey of tax lien sales in Rochester, N.Y.

Simmons said the city does not track what happens to the properties after the liens are sold to the investors and the city receives its money. She said the problem would affect a small subset of the 240,000 property owners notified in July about the back taxes.

"We sell the lien to the third-party investor basically so the city can get the money," she said. "That's what we're in the business for."

Investors do not snap up every lien, typically scouting for those where the value of the property is high enough and the lien low enough that they believe they will be able to collect. In 2013, about 4,000 properties representing more than $58 million in unpaid bills fetched no bids.

Many of the unsold liens are likely vacant properties. Investors are unlikely to acquire liens for vacant properties, Westover said.


This year's advertised sale list includes more than 3,600 vacant properties. Overall, Baltimore counts about 16,000 abandoned properties, of which about one in five are owned by the city.

The city can foreclose on vacant homes with tax liens, but it's choosy about which properties it acquires, Day said. "Virtually all" vacant properties come with liens attached, Day said. It typically forecloses on about 200 vacant properties each year, she said.

"We do not foreclose on every certificate that reverts back to the city," she said. "We do it strategically in the furtherance of projects and with the goal of blight elimination."

Bid submissions for the liens start May 16. The sale will occur May 19.