Author: Municipal Finance Legal Guidance
This month's Ask DLS features frequently asked questions concerning the recent tax title reform legislation. This is part 3 of a multi-part series covering the various provisions of the act. For more information, please see our Bulletin, BUL-2024-6. Please let us know if you have other areas of interest or send a question to dls_alerts@dor.state.ma.us. We would like to hear from you.
How does a municipality dispose of foreclosed property?
§§ 80 and 93 of the Act concern what happens after the Land Court issues a tax title foreclosure decree. Title vests in the municipality upon issuance of the tax title foreclosure decree by the Land Court, G.L. c. 60, § 64, and subject to the requirements of section 64A, described below, the municipality must either sell the property or dedicate it to municipal use. The municipality must decide either option within 14 days after the entry of judgment foreclosing the right of redemption has become final. The judgment becomes final after the taxpayer’s time to file an appeal has elapsed (generally 30 days after the entry of judgment by the Land Court) or, if an appeal did occur, at the time a judgment has entered for the appeal. Municipalities will have 14 days after the applicable final judgment date to decide to sell the property or dedicate it to municipal use.
What if a municipality elects to retain the property?
Unless otherwise agreed upon by the taxpayer, the municipality must use reasonable efforts to have an appraisal of the property be conducted within 120 days of the judgment becoming final. The appraisal must be for the highest and best use of the property as of the date of the final judgment of foreclosure and conducted by an independent appraiser licensed in the commonwealth. The value resulting from this process will be used to determine whether any excess equity exists.
What if a municipality elects to sell the property?
Unless otherwise agreed upon by the taxpayer, the municipality must list the property for sale with a real estate agent or broker within 180 days of the judgment becoming final, as described above. The real estate agent or broker cannot hold elected or appointed office or be employed by the municipality in which the property is located.
If 12 months have elapsed from the date of the initial listing from the agent or broker and the property has not been sold, the municipality must conduct an auction for said property, subject to the following. The auctioneer handling the auction must be licensed in the commonwealth and cannot hold elected or appointed office in the municipality, nor be an employee of the municipality in ANY capacity. The auctioneer may not accept bids at auction that are less than 2/3 of the appraised value. Once a decision is made to move to auction, an appraisal will need to be obtained that complies with the provisions governing retaining the property (i.e., the appraisal must be for the highest and best use of the property as of the date of the final judgment of foreclosure and conducted by an independent appraiser licensed in the commonwealth). No bids may be accepted by the auctioneer from elected or appointed officials in the municipality, nor may any bids be accepted from employees of the municipality that serve in ANY capacity. If a property still cannot be sold after both the initial listing for sale with a real estate agent or broker and the auction, the municipality must notify all parties entitled to excess equity, by certified mail, of its intent to continue trying to market the property for sale, without the property being considered retained by the municipality.
How does a municipality provide for any excess equity after a sale or the receipt of an appraisal?
Within 30 days of a sale or, in the case of a municipality retaining possession, receipt of an appraisal, the municipality must prepare a written itemized accounting setting forth the disposition of the proceeds arising from the sale or a report of the appraisal including, but not limited to, the sale price, legal fees, marketing fees, auctioneer fees, advertising costs, appraisal fees and any excess equity due to any parties entitled to claim excess equity. The written itemized accounting must be sent by certified mail to any parties entitled to claim excess equity to their last known address or place of business.
If the identity and mailing address of the former property owner and all others known to hold the right of redemption in the property are known, in addition to the written itemized accounting, the municipality must provide a proportional share of the excess equity to which each such individual is entitled.
If the identity and mailing address of the former property owner and all others known to hold the right of redemption in the property are NOT known, in addition to the written itemized accounting, the municipality must provide a notice that the former owners of the property and all others known to hold the right of redemption in the property at the time judgment of foreclosure entered in the Land Court may claim excess equity from the sale or retention of the property, in writing to the municipality within 18 months after the date of the notice. Anyone claiming excess equity within that timeframe can either deliver the claim by personal service with receipt acknowledged by the municipality or submit the claim to the collector’s office. The excess equity claim must contain the claimant’s name, telephone number, mailing address, the property address or parcel number and a description of their interest in the property and shall include any other persons or entities known to the claimant to have an interest in the property at the time of the final judgment of foreclosure, including any other former owners, mortgagees, lienholders, heirs or other individuals or entities who held a right to redeem or their successors in interest. The excess equity must be held in an interest-bearing agency account and if not claimed within 19 months of a sale or appraisal of a property then it must be reported pursuant to G.L. c. 200A.
Disputes arising out of this process may be filed by an interested party in superior court within 12 months after the date of the notice of written itemized accounting. Local accountants should note that the Act requires any excess equity be held in escrow in a segregated interest-bearing account until disposed of either to the prior owner or under G.L. c. 200A. In a scenario where the property is being retained, 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.).
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Editor: Dan Bertrand
Editorial Board: Tracy Callahan, Sean Cronin, Janie Dretler, Emily Izzo, Christopher Ketchen, Paula King, Jen McAllister, Jessica Sizer and Tony Rassias
| Date published: | December 5, 2024 |
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