Unpaid $3,056 tax bill may cost Oxford man his $254,000 home
How much notice should town give before taking property?
JOHN SMITH in 1977 bought his home in Oxford, a town just west of Worcester. He worked at a Sakrete Concrete manufacturing facility in his hometown, raised a family there, and by all accounts was a responsible homeowner. He paid off his mortgage and made his tax payments regularly until 2010.
In 2011, with his memory failing, Smith entrusted his adult daughter with his finances. According to court documents, she failed to pay his $3,056 property tax bill, which triggered a series of events that may end up costing him his $254,000 home.
The matter is now before the Massachusetts Appeals Court. While some of the facts of the case are in dispute, a central issue is the fairness of a state law that allows municipalities to seize properties for nonpayment of taxes – and the question of whether homeowners are adequately notified when that happens. Municipal officials defend the law, saying cities and towns need the power of foreclosure to make sure all residents are paying their share of local taxes. But advocates say the law provides minimal notice to homeowners who are being targeted and provides a windfall to municipalities, which can foreclose on a home, sell it, collect the taxes owed, and also keep any money left over.
“Even if the amount of money owed is very small… the town can take the whole property and keep all of the equity,” said Smith’s attorney, Leigh Woodruff of Community Legal Aid.
“Many people in these situations are house rich and cash poor,” said Todd Kaplan of Greater Boston Legal Services, who has represented individuals in similar cases. “They don’t have the money for the taxes, they don’t understand their rights, they don’t understand that their whole house can be lost.”
But municipalities say it is a matter of fairness to all taxpayers to make sure the city collects all the taxes it is owed – even if that means executing a foreclosure. “Cities and towns are very aware and very sensitive to cases where individuals are going through significant issues or problems or challenges, and I think there’s a great deal of reluctance on the part of cities and towns [to foreclose],” said Geoff Beckwith, executive director of the Massachusetts Municipal Association. “But at some point they need to move forward or it places a burden on the other city or town taxpayers.”
According to a brief filed by Smith’s attorney, the town of Oxford sent Smith a demand letter, then published a “notice of taking,” a list of dozens of properties the tax collector intended to take, in the town hall and post office and in the Webster Times. Smith never saw these postings, and the “notice of taking” was not sent to him. The Oxford tax collector in 2011 signed a form taking the title to Smith’s home, without notifying Smith.
In 2013, the town sent a demand letter to Smith’s son, who had power of attorney, asking for $3,300 in taxes, which his son paid. But the town applied that money to future taxes instead of the debt. Through legal proceedings that stretched over the next several years, Oxford moved to foreclose on the home – citing the tax lien – and when Smith did not respond to a court notice, a Land Court judge gave the property to Oxford. In late 2018, the town made plans to auction it off. It was only in 2019 – when Smith was living with his son and trying to evict his daughter from the Oxford home – that Smith learned he no longer owned his house.
After the town takes a title, it can charge 16 percent interest on the tax bill, so if a homeowner learns about the arrears years later, they have often fallen too far behind to pay.
A brief filed by attorneys for Oxford paints a different picture, alleging that for three years, starting in 2011, the town “actively engaged” with Smith, his son, and a social service agency that was helping him but did not secure payment of the taxes. The attorneys say the Land Court notified Smith of the case in 2015, but he did not appear. The town only pressed ahead with trying to take his property two years later, after failing to get a response from Smith. The town says public safety officials have declared the house unsafe, so even if it is auctioned off, the town is unlikely to profit.
Woodruff is arguing that the notice given to Smith was inadequate and would not alert the average person that their home was at risk. “Maybe it made sense 100 years ago when people got their information from going to town hall or the post office, or from a newspaper,” Woodruff said. “Certainly in the context of our world today, using those old procedures is calculated not to give notice, but to hide it from people, so the process gets too far along they can’t dig their way out.”
The issues raised in Smith’s case are not unusual.
In a 2018 article in the University of Massachusetts Law Review, Ralph Clifford, a professor at the University of Massachusetts School of Law, argued that the law is unconstitutional. First, he said, it lets a town tax collector take a title without a hearing, which denies the homeowner due process. Second, the law lets a municipality keep the entire value of the property once the house is seized, rather than just the amount owed in taxes. This is different from a mortgage, where a bank that forecloses can take the amount owed for the mortgage but must return additional money to the homeowner. Clifford estimates that each year in the state approximately $56 million is “unconstitutionally appropriated from taxpayers.”
“I think it’s blatantly unconstitutional both under the federal and the state constitution,” Clifford said in an interview. Clifford said there is no problem with a municipality taking a property to recover unpaid taxes, but to sell a $200,000 house to cover a $3,000 debt, then keep the change, is “theft.”
“We’re not talking about a little bit of ‘theft,’” Clifford said. “We’re talking $50 to $60 million every single year here. And that’s a pretty outrageous amount of money for the government to be appropriating.”
Practically, it is sometimes the municipalities that sell the property. But it can also be a third party company that buys a group of tax liens from the municipality. In Massachusetts, the main company that buys municipal tax liens is Tallage.
Daniel Hill, an attorney for Tallage, said homeowners are given plenty of notice. Towns only move forward with taking a title if taxes are unpaid for a year and the owner ignores a demand letter. The owner has a year to redeem the title. When the property is actually foreclosed on – the point at which the owner would have to leave – it goes through the Land Court, which notifies property owners and holds a hearing.
Hill said the situation of a property being sold while the owner still has equity “doesn’t happen very often at all.” Most of the time tax bills are unpaid, he said, the property has no equity, because the owner owes more money than the property is worth. There may be situations of an estate abandoned after someone dies.
“Our feeling is that there isn’t a problem that needs to be fixed,” Hill said.
Hill said giving municipalities, or companies like Tallage, the right to the equity in a property compensates for other properties that are financially underwater. Changing the process would impose additional burdens on Tallage and municipalities – for example, to track down owners who never responded to letters or court summonses.
Christopher Sweet, the North Attleboro treasurer and collector and president of the Massachusetts Collectors and Treasurers Association, said he “could count on less than five fingers” the number of cases each year involving homeowners who lose significant equity in their home. The bigger problem involves urban communities that have large numbers of abandoned, vacant properties where taxes are not being paid. “This is a tool so communities can recoup the money they need to function,” Sweet said.
Beckwith, of the municipal association, added that the process of collecting back taxes is already long, arduous, and heavily regulated by law and the courts. “The challenge comes in that there are some taxpayers who do not pay their bills, and there needs to be a process that allows communities to place a lien on the property and provide a very strong incentive for people to perform their civic duty and pay the taxes owed,” Beckwith said.
Similar cases to Smith’s have been litigated but have been settled before the constitutional questions were addressed.
The California-based Pacific Legal Foundation, a libertarian group, has litigated three Massachusetts cases, including one profiled by the Boston Globe in January, but all settled. Joshua Polk, an attorney with the Pacific Legal Foundation, said the organization is seeking additional cases to challenge the law.
Polk said Massachusetts is one of around 13 states that allows the entire value of the home to be seized due to an unpaid tax lien, rather than returning excess money to the homeowner. Polk said national research has shown that this provision in the law tends to mostly impact elderly and poor homeowners.
Polk agreed that there is a problem with the notice provided to homeowners, who often do not discover their title has been taken until too late. Sometimes, third party companies will try to sell a title back to the owner for hundreds of thousands of dollars. “It’s a transfer of wealth from the poorest people to either government entities or extremely wealthy private investors,” Polk said.
Two bills pending before the Legislature’s Revenue Committee would change the law. One, sponsored by Rep. Tram Nguyen, an Andover Democrat, would require any company that buys a title to provide clear notice to the homeowner and local Council on Aging. The homeowner would have a year to redeem the title (by paying the taxes and interest), up from six months today. The bill would let municipalities offer more flexible repayment plans to individuals trying to catch up on taxes.
Greater Boston Legal Services has been pushing for the bill, which Kaplan called a “very, very small step” in the right direction. “It just says explain to people that they could lose their home and they could lose all of the value in their home,” Kaplan said.
A second bill, sponsored by Rep. Jeffrey Roy, a Franklin Democrat, and Rep. Tommy Vitolo, a Brookline Democrat, would go further. That bill would make a tax lien seizure similar to a mortgage foreclosure, where the municipality could sell the property to pay the tax debt, but any additional money from the sale would be returned to the homeowner.
The bill would also institute a hearing before a tax collector could take a home’s title, at which a judge would confirm the tax debt and approve the taking. “Right now all they have to do is file an affidavit saying we sent a notice to this homeowner or we posted a notice on a tree in front of the house. That’s adequate notice under the present law,” Roy said. “We would like more stringent requirements on the type of notice, and for a judge to look at what notice was given in the circumstances and to determine whether that notice is adequate.”Similar bills have been introduced in previous years but never passed. Sweet said the treasurers and tax collectors would welcome a comprehensive study of the issue, but it is not a dire situation that requires a quick fix.
Correction: According to information provided by Smith’s son, Scott Smith, after publication, it was Smith’s other son, not his daughter, who failed to pay their father’s taxes for several years, resulting in John Smith losing his home.