Homeowners who owe just a few hundred dollars in municipal debts - including Baltimore City water bills - often are hit with thousands of dollars in fees from private debt collectors and can lose their homes if they don't pay up.
At least 400 city homes have been lost over debts other than property taxes in the past three years, an analysis of city tax records and court filings by The Sun found. Most stemmed from unpaid water and sewer bills, though some also included alley repaving charges, sidewalk repairs and even fees to register rental property.
Roughly half of those foreclosures involved unpaid charges of $500 or less.
"It just seems predatory and abusive through and through to me," said Johanna Neumann, policy advocate for Maryland PIRG, a public interest group. "Clearly something is wrong."
Baltimore Mayor Sheila Dixon said she was surprised to hear how often small debts put home ownership in jeopardy, and suggested an amnesty program as the city had with unpaid parking tickets.
"I would never want to see someone lose their home because they haven't paid a $150 water bill," Dixon said, adding: "This is something that we can revisit."
Localities across the nation take steps to compel homeowners to pay their property taxes. But Maryland's process differs from those of many states in several ways.
Rather than trying to collect back taxes themselves, many Maryland counties and cities sell the collection rights to investors in annual auctions. Those investors buy the right to charge interest and fees that often amount to thousands of dollars, and the right to sue to seize the homes. Rising property values have made the properties worth far more than the debt owed in most cases.
Some Maryland jurisdictions include charges other than taxes in the lien sale process. While that happens only rarely in some areas, nearly one in three of the approximately 8,000 liens that Baltimore City offered for sale last year contained no property taxes, and roughly one in 10 were for debts of under $500.
Some critics of these sales see parallels to the state's system of ground rents - leases for the land under tens of thousands of Baltimore rowhouses - which the General Assembly has overhauled in recent weeks with Gov. Martin O'Malley's backing.
Both systems impose fees on homeowners that are many times the amounts of debts owed, can result in property seizures that net investors thousands of dollars in profits, and often are clouded by questions about whether property owners are adequately notified of the debt before being sued.
"It's far more egregious than ground rent, because the ground rent at least has a cap on costs and expenses," said Kathleen S. Skullney, staff attorney with the Legal Aid Bureau in Baltimore.
Rose Tydings lost two properties in the Berea neighborhood of East Baltimore. In one case, her unpaid water bill of $272.22 ballooned to $6,414.69, including nearly $5,000 in legal fees. "The redemption price was crazy," said Barry M. Tapp, a Laurel attorney who represented Tydings. "She didn't have the money."
In separate court cases in November 2006, judges awarded both homes along East Hoffman Street to Hiwan LLC. The company's registered agent is Baltimore County lawyer Heidi Kenny, and her husband, Steven L. Berman, is the managing member, according to property records.
Firms connected to the couple bought $2.4 million worth of liens last year, making them among the three largest tax-sale investors in Baltimore. Neither Kenny nor Berman would comment for this article.
Many public officials defend the tax sales process, which was adopted by the state a half-century ago and now is used to collect any debt over $100.
In November, Baltimore's City Council withdrew a proposed ordinance that would have kept liens resulting exclusively from water bills out of the annual auctions. That action came after high-ranking city officials argued that many property owners would stop paying their bills without the threat of foreclosure.
Baltimore officials point out that most people who lost property in the city failed to respond to repeated demands for payment - including the lawsuits filed against them. Still, they acknowledge that large numbers involve relatively small sums.
Stanley J. Milesky, chief of the city's Bureau of Treasury Management, said that while a tax sale has "some unsavory dimensions," it is "an effective way for compelling people to pay the city."
Private utilities such as Baltimore Gas and Electric Co. shut off service, after going through many regulatory steps, if someone doesn't pay a bill. But Baltimore officials generally place delinquent water bills of more than $100 into lien sales rather than shut off the service. The city can take that step because the Public Service Commission has no authority over municipal utilities.