Author: Municipal Finance Legal Guidance
This month's Ask DLS features frequently asked questions concerning the tax title reform legislation, Chapter 140 of the Acts of 2024 (the “Act”). This is Part 2 of a multipart series covering the various provisions of the same. For more information, please see our Bulletin, BUL-2024-6 and Part 1 of this Ask DLS. Please send a question to dls_alerts@dor.state.ma.us. We would like to hear from you.
What is the new tax title interest rate?
§ 88 of the Act amends G.L. c. 60, § 62 by reducing the tax title interest rate from 16% to 8%. DLS interprets this provision as applying prospectively. As such, the reduced interest rate is only applicable for tax titles entered into on or after the effective date of this section of the Act, which is November 1, 2024. Any property already in tax title before November 1, 2024 will continue to accrue interest at a rate of 16%.
Massachusetts courts presume that laws apply prospectively only. Generally, laws apply retroactively only when it is clear from the express terms of the law itself that the Legislature intended so. Nothing in Section 88 expressly provides for retroactive application of the new interest rate prior to the effective date of the amendment - i.e., November 1, 2024 – so the presumption against retroactive affect applies. It is noteworthy the Legislature made other amendments concerning tax title foreclosure retroactive, see Section 212 described below, implying they intentionally made the new interest rate applicable only to new cases arising under the amended law.
How were tax title payment agreements changed under the new legislation?
§§ 89-91 of the Act amend G.L. c. 60, § 62A. Under § 62A, treasurers may waive interest on a tax title account only as authorized by an ordinance or bylaw adopted by the municipality under G.L. c. 60, § 62A. Municipalities may, by ordinance or bylaw, provide for payment agreements between the treasurer and taxpayers entitled to redeem parcels in tax title. Now, the payment agreements can last up to 10 years and may include a provision to waive a percent of the interest (up to 100%) that would otherwise be owed to redeem the tax title if the taxpayer complies with the payment schedule in the agreement. Upon execution of the agreement, the taxpayer must pay at least 10% of the total amount needed to redeem at that time. The ordinance or bylaw must establish the parameters of the payment agreements, including the categories of eligible tax titles (e.g., residential or owner-occupied residential property, or commercial property) and the term and interest waiver that applies to agreements for those categories. The ordinance and bylaw cannot modify the statutory interest rate or waive any collection costs or charges. Before this change, the payment agreement could only last for up to five years, upon execution of the agreement the taxpayer was required to pay at least 25% of the total amount needed to redeem at that time and the agreement could only waive up to 50% of the interest.
Can property owners who were foreclosed upon prior to the effective date of the Act able to file a claim to retroactively obtain any excess equity?
Section 212 of the Act concerns the retroactive ability of former owners to claim any excess equity. Former owners may seek excess equity that resulted from their foreclosed property if their right of redemption was foreclosed upon by a final judgment of foreclosure entered on or after May 25, 2021 but before the effective date of the Act. Prior owners must do so by filing a written complaint in the superior court for the return of excess equity within 12 months of the effective date of the Act. While certain provisions of the Act are effective as of July 1, 2024, the majority of the herein described provisions become effective as of November 1, 2024. As such, it is not entirely clear whether claims by former owners must be filed by July 1, 2025 or by November 1, 2025. In any case, no claim for the return of excess equity may be asserted by any party where a Land Court judgment of foreclosure was entered and not appealed, on or before May 24, 2021.
While DLS interprets this section to allow claims to be filed by November 1, 2025, given the ambiguity noted above, municipalities should consult with their local counsel to make this determination.
If a claim for excess equity is made pursuant to Section 212, the municipality must have an appropriation to provide for the excess equity. The appropriation can be made from any available funds in the community (e.g. free cash, general stabilization fund, etc.). If the claim becomes a final judgment, award or payment ordered or approved by a state or federal court or adjudicatory agency and, upon certification by the city solicitor or town counsel that no appeal can or will be taken and as required by municipal charter, ordinance or by-law, then the payment of the claim can be made from any available funds in the treasury pursuant to G.L. c. 44, § 31. Then, unless otherwise provided for, the amounts incurred must be reported by the auditor or accountant or other officer having similar duties, or by the treasurer if there be no such officer, to the assessors, who must include the amounts in the determination of the next annual tax rate.
Stay tuned for next month’s tax title reform legislation Part 3. We will cover the disposition of foreclosed property.
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| Date published: | November 7, 2024 |
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