In 2003, the Maryland General Assembly changed the laws regarding attorney's fees charged in tax-sale foreclosure cases. The previous standard, a maximum of $400 under any circumstances, was changed to a "reasonable attorney fee" standard as long as a lawsuit has been filed.
This was an attempt to compensate attorneys for their time and expertise in matters that were both tedious and technical, and whose time was worth more than the $400 cap that had been in place since 1985.
Before the change, there were about 500 tax-sale lawsuits in Baltimore annually. And since then? The number of lawsuits has risen tenfold - to approximately 5,000 per year. Attorney's fees have also gone up drastically and are now often between $2,000 and $4,000 per case.
A seemingly minor change in the law has thus spawned an egregious abuse of the system.
The law now encourages the filing of cases, which clogs up the court system and gives attorneys carte blanche to charge whatever fees they deem reasonable, with no effective oversight.
The public should know that most tax liens sold by municipalities across the state to collect delinquent real estate taxes are purchased by attorney-controlled entities that have millions of dollars to effectively monopolize the tax lien auctions. I was once heavily involved in such transactions.
Keep in mind that Maryland is one of the few states that even allow attorneys to become involved in this process; in most places, municipalities handle the foreclosure-collection process themselves.
Recently, the Circuit Court of Baltimore City ruled that attorney fees would be limited to a maximum of $1,500. Judge Evelyn Omega Cannon's opinion was well thought out and fair; unfortunately, it is not binding law and doesn't have to be followed unless the case ends up in her court.
Two fundamental changes need to be made this year in Annapolis:
1) A cap on attorney's fees must be reinstated.
2) Property owners and mortgage holders must be given additional notice of a tax sale before a lawsuit is filed. Currently, the only required notice is the publication of a legal ad in the newspaper; in Baltimore, a form letter is also sent to the owner of record (which may or may not be received). Requirement of additional notice of the tax sale to property owners and the mortgage holders can lead to a resolution and settlement, thus avoiding the need to file suit.
Last year, the legislature, responding to a public outcry, made wholesale changes in the ground rent system in Maryland. This year, the mortgage foreclosure crisis will get top billing in Annapolis.
Let's make sure that the injustice and abuse in the tax sale process are rectified by the same legislative body that changed the rules five years ago.
It's about time for the citizens of our state to have a tax-sale foreclosure process that is fundamentally sound and fair for all parties.
Jay A. Dackman is a Baltimore attorney with 20 years of experience in the tax-sale business. His e-mail is email@example.com.