Author: Municipal Finance Law Bureau
This month's Ask DLS features frequently asked questions concerning takings & foreclosures. Please let us know if you have other areas of interest or send a question to cityandtown@dor.state.ma.us. We would like to hear from you.
What is the process for a tax taking?
If a real estate tax remains unpaid, a demand must first be made which is a prerequisite to the taking. The collector must send a demand to the assessed owner after the due date for payment of the last installment of the tax, i.e., May 2 or one day after the final due date, if later than May 1. The demand is sent to the assessed owner’s last or usual place of residence or business, or alternatively, to the address best known to the collector. G.L. c. 60, § 16. If no payment is made after the demand is sent, then the collector should perfect and secure the municipality’s lien on the real estate by a tax taking.
The collector must wait at least 14 days after the demand is sent. G.L. c. 60, § 17. If the taxes still are unpaid, the collector must give notice of intent to take by (1) publishing a notice in a newspaper published in the city or town, or, if there is no paper published in the city or town, in a newspaper published in the county, and (2) posting a notice in two or more public places. The publication and postings need not be made on the same date, but all must occur at least 14 days after the demand is sent. The notice must contain a description of the property to be taken, the amount of taxes and other charges for which the property will be taken, the names of all owners known to the collector, and the time and place of the taking. G.L. c. 60, §§ 1, 40 and 53.
The collector must then wait at least 14 days after the later of the publication or posting of the notice of intent to take. The collector then makes the taking at the time and place in the notice and records or registers an instrument of taking at the Registry of Deeds within 60 days of the date of taking. The instrument of taking must include a description of the property, the name of the assessed owner or owners, and the taxes and charges for which the property was taken. G.L. c. 60, §§ 53 and 54.
When can a municipality foreclose on a property?
By perfecting and securing the real estate tax lien, the collector has created a tax title which becomes the responsibility of the city or town treasurer. If the treasurer receives full payment of the total amount in tax title as of the payment date, then the treasurer issues a redemption certificate. If full payment is not received, the treasurer can institute a proceeding to foreclose the taxpayer’s right to redeem by (1) filing a petition in Land Court, G.L. c. 60, § 65, or (2) if the land is low value, by auction after obtaining an affidavit from DLS within the Department of Revenue, G.L. c. 60, §§ 79 and 80. The city or town treasurer is responsible for management of tax titles.
If the amount in tax title is not paid, then the treasurer can seek to enforce the lien through foreclosure. With some exceptions, the treasurer must wait six months after the tax taking to file a petition in Land Court to foreclose all rights of redemption. G.L. c. 60, § 65. Exceptions include where a taxpayer has a tax deferral (six months after the property is sold or taxpayer dies, G.L. c. 59, § 5, Clauses 18A and 41A) and the buildings on the parcel are abandoned (immediately after recording of affidavit from the building inspector, G.L. c. 60, § 81A).
Once the petition is filed, the Land Court will appoint a title examiner to identify all interested parties in the property. The parties will be notified of the proceedings by registered mail in order to respond to the petition or redeem the tax title. G.L. c. 60, § 66. If the tax title is not redeemed or the tax taking is not successfully challenged, the Land Court will issue a decree of foreclosure. The decree vests title to the property in the city or town. If the owner files a petition within one year and pays all amounts outstanding, the Land Court may vacate the foreclosure decree. G.L. c. 60, § 69A. A successful petition to vacate within the one-year period requires extenuating circumstances. Town of Bourne v. Coffey, 101 Mass. App. 496, appeal denied 490 Mass 1107 (2022).
An alternative to judicial foreclosure is the Land of Low Value procedure. The normal foreclosure process for taking ownership of a parcel for nonpayment of taxes is long, complex and expensive. The Land of Low Value foreclosure procedure is an alternative to seeking a foreclosure decree from Land Court under G.L. c. 60, § 79. See IGR-2021-22 for more information on the administrative foreclosure process following the receipt of a Commissioner of Revenue’s affidavit pursuant to a Land of Low Value tax title foreclosure application. It should be noted that communities may accept title from the owners of properties on which there are municipal liens as an alternative to tax taking and foreclosure proceedings. G.L. c. 60, § 77C. See IGR-2021-22.
If a resident has not been paying taxes on their real property, and the Land Court issues a tax title foreclosure decree vesting title in the municipality, when should the community remove the real property from the tax rolls?
Real property acquired by a community as the result of tax title foreclosure should not be removed from the tax rolls for the fiscal year after the year the foreclosure decree is entered by the Land Court since the owner has the right to petition Land Court to vacate the decree within one year after the final entry of the decree as provided in G.L. Ch. 60, § 69A. This does not mean any tax assessed on the property for a subsequent fiscal year should be abated. Instead, the tax, including interest and charges, should be certified by the collector to the treasurer and accounting officer and transferred to the tax possession account. Any taxes that remain on the collector's books because they were not certified to the tax title account before the foreclosure decree was issued should also be certified and transferred to the tax possession account pending a final disposition of the property. In our opinion, the community should be able to require payment of these amounts in addition to those for which the foreclosure decree was entered if the original owner seeks to vacate the decree and redeem the property.
Does an error in the notice requirement impact the tax title?
Yes. The Land Court, which has jurisdiction over tax title foreclosure petitions, could declare the tax taking invalid. There are many examples of fatal flaws in the tax taking process. For example, the taking would be invalid if the collector did not send the demand to the assessed owner, sent the demand to an incorrect address or did not record the instrument of taking within 60 days of the taking as required by G.L. c. 60, § 54.
If there is an error in the tax taking procedure, the collector should disclaim the taking and retake within 90 days and the lien will be valid. G.L. c. 60, § 37. If the taking is invalid due to an error in the assessment, such as an assessment made to a non-owner as of the January 1 assessment date, the collector should disclaim the taking and the assessors should reassess the unpaid taxes to the actual owner on January 1. Under G.L. c. 59, § 77, the reassessed tax is a lien for the same period and under the same conditions as the original tax. If the lien for the reassessed tax is valid and the reassessed tax remains unpaid, the collector should send a demand to the reassessed owner and then make a new tax taking. If, for instance, the tax commitment from the assessors lists the incorrect owners, the collector should disclaim the taking, send a demand to the reassessed owner and then make a new tax taking.
What happens when a municipality goes through the tax taking and foreclosure process on a condominium? Who is responsible for any condominium fees?
From the date of taking and prior to foreclosure, the condominium association could recover unpaid condominium common area charges from the municipality. Town of Milford v. Boyd, 434 Mass. 754 (2001). After a municipality forecloses on a condominium, the municipality would be responsible for the condominium fees from the date of foreclosure. G.L. c. 183A, § 20. We would recommend consulting with local counsel when this issue arises.
What is the foreclosure procedure if the property in question is currently the subject of a deferral agreement pursuant to G.L. c. 59, § 5 (41A)?
The payment of deferred taxes and accrued interest is due when the property is sold or the property owner passes away, unless a surviving spouse continues to defer. As of that date, the interest rate goes up to 16%. If 6 months later, the deferred amount has not been paid, the treasurer may petition the Land Court to foreclose the lien on the property.
Can a community be given a parcel of land that is in tax title?
Yes, by acceptance of a deed in lieu of foreclosure. Communities may accept title from the owners of properties on which there are municipal liens as an alternative to tax taking and foreclosure proceedings. Properties accepted under this option are then treated as if a tax title foreclosure has been completed. G.L. c. 60, § 77C.
Liens for outstanding real estate taxes or other municipal liens must exist on the parcel at the time title is accepted, but the parcel does not have to be in tax title.
Title to the parcel may be accepted, however, subject only to municipal liens. This means that all other liens or encumbrances, such as mortgages, mechanics or other liens, will ordinarily have to be cleared before the municipality may accept the deed. Alternatively, the deed may be accepted if all mortgagees, lien holders and others with interests in the parcel convey their interests to the municipality.
To protect the municipality, all parties with interests in the parcel will have to be identified and, therefore, a title examination may be required. Municipal counsel should be consulted regarding any proposed transaction and municipalities should adopt policies regarding the circumstances under which they will accept title to a parcel.
Additionally, acceptance should generally be limited to parcels with a current fair cash value of at least the amount owed unless a parcel is being acquired for a public use or the enforcement of personal liability against the assessed owner is unlikely or impossible. The assessed owner of a parcel that is worth less than the amount outstanding would otherwise realize a windfall since acceptance discharges the owner from personal liability, and the municipality could not recover any deficiency, unlike an ordinary tax title foreclosure. In City of Boston v. Gordon, 342 Mass. 586 (1961), the Supreme Judicial Court permitted the City of Boston to seek a deficiency judgment for the unpaid balance in excess of the parcel’s fair market value. If there is a deed in lieu of foreclosure, the assessors are to remove the parcel from the tax roll beginning in the fiscal year after the title is transferred to the municipality. All municipal taxes and charges outstanding as of the date the deed is recorded are to be carried in a tax possession account. This includes the full amount of taxes assessed for the current fiscal year, as well as all accrued interest and collection costs, owed as of that date.
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| Date published: | April 6, 2023 |
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