Elderly tax delinquents are in trouble. Post 51

New York Law Journal   New York Lawyer

August 31, 2007 By Thomas Adcock

A Taxing Problem

Speculators in the shark-infested waters of the real estate world smell the blood of new prey:  the elderly who long ago paid off mortgages on houses now worth hundreds of thousands of dollars and who fall behind on likewise increasing property tax payments, facing the prospect of losing their title and their equity to someone who can cover as little as a few thousand dollars of debt.

Cities and counties are obliged to file tax liens against property owners in arrears. Often, governments are then forced to sell off liens to third parties who become legally entitled to collect the outstanding debt, in addition to a surcharge of 5 percent, according to established national standard, as well as 18 percent interest until restitution is made.

Michael J. Wilson, an associate in the Washington, D.C., office of Morgan Lewis, said the elderly are most at risk. Last month …he began a unique pilot project that aims to ward off potential homelessness.

Similarly, the New York City Department of Finance and the Department of Housing Preservation & Development will launch a joint survey project in the Bronx in November to determine the dimension of the problem; the reasons homeowners fall behind on taxes and how to help them retain their properties.

Trouble comes in terms of penalties applied to an outstanding tax bill, plus interest. Generally, said Mr. Wilson, the hot properties are homes worth about $300,000 on the open market, with an outstanding tax bill of about $2,000.

“You could buy the lien for that amount plus a few thousand more to buy out other liens, and you walk away with a tax sale certificate,” said Mr. Wilson. “You wait six months, then you go down to Superior Court and file an action to foreclose with right of redemption.”

He added, “This is a problem that’s flying under the radar screen. We need to set up some sort of safety net. We need to catch these people – mostly low-income elderly people – before they wind up in a black hole they can’t get out of.”

Mr. Fish, a partner in the elder law firm Freedman Fish & Grimaldi and a Law Journal columnist, said that legal housing issues are the number one problem faced by the elderly, followed by health care matters.

Oda Friedheim, a staff attorney for the Legal Aid Society of New York, said elderly people desperate to keep their homes often turn to predatory lenders.

“They get scammed by one-stop-shopping outfits run by brokers who call themselves ‘home-savers,'” she said. “These brokers push abusive refinance loans. And sometimes the homeowner is even tricked into signing over a deed. They think it’s refinancing; they think it’s just one more paper to sign in a big stack of papers.”

Sometimes, she added, attorneys collude with the scammers.

It is entirely common that a house in New York City worth $800,000 can have its tax lien sold for as little as $10,000, with foreclosure to ensue, said Ms. Fiorino.

See full article: http://www.nylawyer.com/display.php/file=/probono/news/07/083107a

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Coach Mitch’s REFLECTIONS

The profits are real, so is the hypocrisy

The reason that investors get into a particular market is that they think a profit can be made.  Investors honestly admit this.  Governments also want their profit (taxes) but are loath to admit it.

No breaks given to property tax delinquents

I often bemoan that an owner finds himself in the situation that he cannot pay his taxes.  It is very, very common.  Just ask the IRS how many persons cannot make even a reasonable payment on taxes which are overdue.  At least with the IRS there is a program to reduce the amount owed.  I have helped students reduce an outstanding tax burden from $45K to a mere $14K.   Isn’t that nice!  There is no such equivalent program to reduce delinquent property taxes.

What is the investors responsibility?

It is a real shame that a homeowner has not taken care of his own finances well enough so that his property taxes can be paid.  One question is, “Is it the investor’s responsibility to inform the seller of any and all options in the marketplace?  NO.  It is a sellers responsibility to learn and know everything that will protect himself and make himself prosperous.

The Big Lie.

There is a notion amongst the Miscreant Class (Political Class) that they can call investors any bad name and get away with it.  They probably can.  But government created the situation that expels folks from their homes – not investors.

It is the Miscreant Class (Political Class) who creates the laws and the punishments.  Government creates the programs, the rules, the timetables and the potential results for not complying with the rules.  Yet, the Miscreants, without fail, try to pass the buck when there is negative fallout.  The Miscreants want the benefit (taxes) but not the blame for a little old lady being made homeless by an investor who is just following the rules set up by the Miscreants.

It is government who set up the system of taxation of property.

This was a good notion, back when extremely large swaths of land were owned by a few wealthy landowners (landlords). That is no longer the case. Just as summer school vacations are no longer needed so children can help on the farm, the idea that taxes should be tied to property is outmoded, unnecessary and noxious.  There are better solutions to raising taxes.

Let the punishment fit the crime.

Governments set up rules where tax lien certificates are made attractive by the offering of very large interest rates or penalties; often 18 – 36%.  The Miscreants set up the rules that hurt people because they insist upon their pound of flesh.  They, of course, will state that a fireman must be paid.  True, but why does someone have to lose their home in order for that fireman to be paid?

Think about it.  The home in NYC is worth $800K, there is $10K in delinquent taxes and the investor forecloses, leaving the previous owner homeless.  How, in the abstract, can it possibly be justified that a $10K bill could payout $800K in six months?

Lies upon lies.

As if blaming investors is not enough, here is a doozy.  In New York State, the tax collection law allows a county to tax property and after four years of tax payments not being made, the county can take the property through a easy judicial foreclosure proceeding, auction off the property to the highest bidder and keep all proceeds over the amount of taxes owed. It does not matter if the previous owner was a little old lady who was thrown out on the street.  And the Miscreants have the nerve to call investors sleazy.  A federal court has called this practice “unseemly.”

Lack of Notice.

I have seen this many, many times.  The county Tax Collector says, “Well, we give them (the tax delinquent) plenty of notice.  And we have expenses.”

Legal “Notice” is complied with by placing an advertisement in a local paper announcing the upcoming tax foreclosure.  Question; if the tax delinquent is no longer living in the tax delinquent home, how likely is it that they will even know that their property is about to be taken from them?  The Miscreants do not even have the decency to mandate that a proper search be conducted prior to taking the property.  To my mind, a proper search would resemble what a skip tracer would do.  The government will say that it is too much of a burden and too expensive.  Yet, somehow, it is investors who are hard-hearted.

Where in the private sector is this behavior tolerated?

Banks can do it also.

If the foreclosed upon house has not sold at auction, the owner still has the right to redeem the property by paying all outstanding monies.  In NY it is 30 days.  After that, the bank gets to own the property outright.  The bank puts the property on the market and keeps any profit.

Now we know why lawyers (government) and bankers are the Miscreant Class.

Opportunities abound.

Couch Mitch’s “Ridiculously Simple System…” uses proven data base techniques in order to easily identify those who are in trouble because of not being able or willing to pay their taxes. These folks are a treasure trove of persons who are receptive to listening to your offer.  They often want to be out of the property and you are a welcome voice.

See Coach Mitch’s “Ridiculously Simple System…” ™ for details.

Happy landings,