Tax Sale

In an effort to spare some homeowners the loss of their properties in municipal tax sales, lawmakers are proposing several reform measures. State Sen. George W. Della Jr. has introduced legislation to cap legal fees at the end of the court process and to improve notification. The Baltimore Democrat says he hopes to cut expenses and save homes. Legal costs in these lawsuits have soared in recent years, making it harder for homeowners to regain the rights to their properties by paying back taxes and accumulated fees.

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.

Records turned over to a federal grand jury investigating municipal tax-sale auctions show that two of Maryland's largest tax-sale investors didn't bid against each other for properties during the past four years in Montgomery County. Bidding lists were among documents demanded in the subpoena, which also sought any records from 2002 to 2007 that would show whether bidders communicated with one another about what properties they would bid on and prices they would pay, or about any inducement not to bid on certain properties or not bid at all. The subpoena is part of an investigation being coordinated by the Justice Department's antitrust division in Washington.

A generation ago, ordinary folks showed up at annual auctions of properties that had unpaid taxes and fees, looking for a bargain or perhaps to help keep a neighbor from losing a home. But that homespun feel has given way to high-stakes online bidding by groups of deep-pocketed real estate investors who compete for the right to collect property liens. Three such groups paid a total of more than $8 million to buy up nearly three-quarters of the liens in Baltimore's 2006 auction. The tax sales are now dominated by investors "who have the capital to invest in dozens if not hundreds of properties," said Michael Sanderson, legislative director for the Maryland Association of Counties.

Baltimore's annual sale of rights to collect back property taxes proceeded as usual Monday despite pending city legislation that would keep homes from being included in the process over unpaid water bills and Mayor Sheila Dixon's suggestion of amnesty for such debts. Stanley Milesky, chief of the city's Bureau of Treasury Management, said he didn't yet have information on how many of the 7,699 liens sold to investors involved water bills or other small municipal liens. About 750 such liens changed hands in last year's tax sale.

On the steps of a downtown courthouse yesterday, under gray skies and a morning chill that had yet to burn off, Yvonne Palmer's house was sold. She wasn't even there as an auctioneer, in the rapid-fire delivery of his trade, rattled off the legal description of the property and the terms of the sale. About a dozen potential bidders listened, affecting the kind of desultory, I-could-take-it-or-leave-it air that you see at any auction, whether at Sotheby's or outside a courthouse. It's an odd little sidewalk drama - an alfresco auction is a strange thing to pass as you enter the courthouse for jury duty or make your way to the corner hot dog vendor for lunch - but one that is on the rise nationwide.

A federal jury in Baltimore awarded $115,030 yesterday to two people evicted from the home they were renting, because they were never given adequate notice by a local investment company that had foreclosed on the property after purchasing a city tax lien at auction.The jury award against Tax Sale Investors Inc. included compensatory damages of $40,000 each to Elbert Sallie, 70, and his cousin, Diana Marshall, 53, who lost jewelry, electronic equipment and mementos after the company had their possessions put on the street outside the Northeast Baltimore home.

Dear Mr. Azrael:I own two ground rents in the city. One of the houses is boarded up and the other is burned out. Before this came about, I spent considerable money to try and collect the moneys due. However, it was to no avail. What becomes of the rents if the city condemns the houses or they are sold for taxes?Lourdes Strum TowsonDear Mr. Strum:Unfortunately, your ground rents probably are worthless.The owner of a burned out or boarded up property has no incentive to pay the ground rent.

When a wrecking ball crashed into Hammerjacks last spring, it seemed as if the Maryland Stadium Authority's protracted dealings to acquire the mammoth South Baltimore nightclub to use as a parking lot was over.Not quite.On Tuesday, the stadium authority filed suit against Hammerjacks, charging that the club had improperly failed to disclose that there was a lien for unpaid city property taxes on two of the three parcels the authority bought.Last month, the stadium authority paid off the debt -- about $40,000, including interest -- which had been purchased at a city auction by a group of investors, according to records and interviews.

Saying the city's high liens are driving owners and investors away, 3rd District Councilman Martin O'Malley introduced a bill last night to severely curtail the growth of liens that often choke the rehabilitation of blighted neighborhoods.O'Malley's proposal gained quick support on the council, with at least 13 colleagues signing as co-sponsors.The city now charges 24 percent interest on outstanding liens slapped on properties offered at tax sale. Under O'Malley's proposal, that rate would drop to 6 percent.

Fur coats, trips and other treats for the mayor? At least $15,348. Political poll for City Council member? $12,500. City property taxes? Priceless. Or, rather: Unpaid. The free-spending Ronald Lipscomb, the developer whose gifts to Mayor Sheila Dixon and Councilwoman Helen Holton figure in the indictments against all three of them in the City Hall corruption scandal, seemed to have suddenly misplaced his checkbook when it came to the kinds of payments actually required by law. Lipscomb's Doracon Contracting - which prosecutors say got tax breaks because of his cozy relationship with city officials - owes the city about $27,000 in unpaid property taxes on its 3500 E. Biddle St. offices.

THE PROBLEM : Baltimore property owners paid their tax bills, but the payments weren't properly processed. THE BACKSTORY : Carol Foster of Phoenix couldn't understand it. She paid the property tax on her husband's dental office on Harford Road in July when the bill was due. But, in December, the couple received another letter. Foster thought it was another invoice. "I said, 'What, I've got to pay this twice a year now?' " she said. It was actually a notice to pay the taxes owed or the property would be sold at tax sale.

A veteran Baltimore real estate investor could serve up to 18 months in prison for conspiring to rig bids at Maryland tax sale auctions under a plea deal that obligates him to cooperate with a continuing criminal investigation of the auctions. Steven L. Berman, in a plea agreement filed yesterday in U.S. District Court in Baltimore, admitted to a single felony count of bid rigging. Berman, 50, also agreed to pay a $750,000 fine. "This is a very unusual case," said Berman's attorney, Geoffrey R. Garinther of Towson.

Federal investigators looking into Baltimore's tax-sale auctions have found their canary. Steven L. Berman, a veteran real estate investor from Pennsylvania, has agreed to cooperate with U.S. Justice Department prosecutors as part of a guilty plea in a bid rigging scheme. Mr. Berman is not just any canary. He has participated in tax-sale auctions in the city and five counties for several years and should be intimately familiar with the system, its vulnerabilities and payoffs. Tax sales remain a largely unnoticed, little understood process by which governments recoup unpaid property taxes and other municipal bills.

Baltimore is defending its practice of selling houses that have tax liens for unpaid water bills and other municipal fees, denying accusations by a major national bank that the city is responsible for a recent increase in mortgage foreclosures. The city defended the city's tax-sale practices in federal court filings this week as part of a groundbreaking lawsuit filed by Baltimore against Wells Fargo Bank. The city alleges in U.S. District Court that the bank exploited African-American families in Baltimore by offering them higher-interest loans than they offered white buyers, stripping them of equity through refinancings and charging them excessive points and fees.

Let's be clear here: We're not talking about people who foolishly bought more house than they could afford, or took out a subprime mortgage that they didn't understand or gambled that an adjustable rate loan that started low wouldn't ever, duh, adjust upward. We're not talking about any of those self-inflicted, foreclosure-inducing stab wounds that have contributed to the current housing crisis. We're talking about someone's house possibly being seized over what started out as a $173 water bill.

More than 20,000 Baltimore property owners who have fallen behind on real estate taxes or services such as water bills must pay up by the end of the month or face possible foreclosure. City officials plan at their annual tax sale next month to auction up to $70 million in liens to private investors, who can then collect the debts - plus thousands of dollars in fees and interest - or foreclose if they can't collect. The liens are mostly for delinquent property taxes but also include municipal levies such as water and sewer billings, charges for sidewalk and alley repair, and fines for failing to clean up trash or other environmental hazards.

Fewer homes would be subject to tax sales under a compromise reached by legislators and property investors, officials said yesterday. Responding to cases in which local governments -- primarily Baltimore -- have foreclosed on homes over small debts, including unpaid water and sewer bills, legislators have coalesced around a bill that would increase the threshold for debts that can trigger a tax sale, cap attorneys fees and provide a safety net for the...

In an effort to spare some homeowners the loss of their properties in municipal tax sales, lawmakers are proposing several reform measures. State Sen. George W. Della Jr. has introduced legislation to cap legal fees at the end of the court process and to improve notification. The Baltimore Democrat says he hopes to cut expenses and save homes. Legal costs in these lawsuits have soared in recent years, making it harder for homeowners to regain the rights to their properties by paying back taxes and accumulated fees.

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.