Baltimore City may be contributing to its problem with vacancies. City codes are pushing homeowners out of their homes over as little as $250 in unpaid property taxes or $350 in unpaid water bills through an often opaque process known as “tax sales.”
In a tax sale, the city auctions a property with outstanding taxes or water bills (or, in some cases, other types of taxes or fees that can trigger a sale). Private investors bid on the properties, according to Susan Francis, deputy director for the Maryland Volunteer Lawyers Service, one of just a hand full of organizations providing legal assistance for homeowners facing tax sales in Baltimore City. The highest bidder receives a tax sale ‘certificate’ after winning the auction.
The auction winner pays only the outstanding debt to the city at the time of the tax sale, and is only responsible for the remainder of her bid if she attempts to register a new deed (to actually take ownership of the property), says Francis. Before an investor can do that, however, the homeowner has a chance to redeem their home (pay off the outstanding debt and preserve full ownership of their home).
A homeowner who redeems their home within four months of a tax sale has to pay the outstanding lien plus 18 percent interest to the city. A homeowner looking to redeem more than four months after a tax sale must pay the lien plus 18 percent interest, the legal fees and expenses of the investor, and any current taxes on the property, according to a 2014 report on Baltimore’s tax sale policies produced by the Abell Foundation.
If that sounds complicated and confusing, the reality of navigating a potential tax sale by the city is even more so, according to homeowners and volunteer attorneys who have gone through the process.
Around 2011, after losing his job, Edward Mason fell behind on his utility bills and taxes on his East Baltimore home. Mason said he made an agreement with the city to pay off his outstanding debt, on the condition that he remains current with future taxes and fees.
In 2012, Mason experienced a fire in his home, which was uninsured at the time. This led to a series of city fees including charges for debris removal after the fire, as well as other citations for issues related to Mason not being able to rehab the home quickly for lack of funds.
“I didn’t know that if you’re a homeowner, a taxpayer, and you’re unfortunate to have a fire, I didn’t know that you’re required to pay the fire department for coming and picking up the trash from that,” said Mason.
Mason was facing the loss of his home – which had suffered mostly cosmetic damage – over the mounting fees, made worse by his unemployment. Had Mason not been connected to the Volunteer Lawyers Service through another organization called Just Advice, he would not have been able to resolve his issues with the city.
“I would’ve just walked away and left my house which I didn’t want to do, or couldn’t do because I didn’t have anywhere else to go,” said Mason.
Before reaching out to Just Advice, Mason attempted to deal with the city directly in order to find a way to become current and keep his home, but to no avail. “I just kept getting the run around,” said Mason. “Everybody was telling me, ‘Well, you should’ve went here,’ when I’d go there they’d say, ‘No, they could’ve helped you over there,’ you know, back and forth. I was getting pretty frustrated with the whole process and that’s when I was about to give up. I did find, once I got the help of the Volunteer Lawyers Service, I went to some of the same people and the same places, but I did get more of a response, maybe because they knew that someone was following up on it and I wasn’t just walking in off the street.”
Kristin Rieger, the volunteer attorney who helped Mason navigate the tax sale maze and ultimately stay in his home, says that while there are processes in place to resolve issues like the ones Mr. Mason had, it is not always clear what they are. “I think a lot of the issues that homeowners like Mr. Mason have to deal with in Baltimore City are very opaque, and they’re just as opaque to lawyers as they are to homeowners,” said Rieger.
There is also a disconnect between what the city is willing to do to help homeowners resolve these issues and the means many Baltimore City homeowners have at their disposal, says Rieger, who notes that in some cases the city might be more willing to work with the homeowner with an unpaid water bill, if, for example, the homeowner hired a plumber to address an issue that had caused high water bills.
“When you’re someone with very limited means, the prospect of calling a plumber is pretty darn frightening,” said Rieger. “You assume you’re going to have to pay $300 just for the plumber to walk through the door, and if your water bill is $150 and you can’t pay that, and that’s why you’re in trouble, how can you call the plumber?”
Most of the clients the Volunteer Lawyers Service has helped with tax sales are on a fixed-income, either senior citizens or the disabled, and find it difficult to come up with the payments for their city debts, says Francis. Most are African American, and the average length of time they have lived in their homes is 21 years. “The majority of these don’t have a mortgage, but they’re still at risk of losing [their homes in] a tax sale,” said Francis.
In 2014, the city sold 2,236 tax sale certificates for owner-occupied homes, according to the Abell Foundation report, each representing a person or family who could lose their home if they remain unable to pay off their outstanding debts, plus interest and, potentially, fees and other costs incurred by the certificate holder (not to mention remain current on their other fees and taxes).
Compounding the problem for homeowners is that fact that the city does very little to connect people at risk of losing their homes through the tax sale process with available resources that might help them avoid such a loss. Francis says that her organization has asked the city’s departments of finance and public works if the Volunteer Lawyers Service can include some resources to go along with notices sent to homeowners but have been told no, though they have worked with the city’s Department of Aging to send lists of resources to homeowners who have lived in their home for more than 25 years.
On March 27, the city held a press conference to announce that beginning April 1, the Department of Public Works would begin shutting off water to customers who were either $250 or two quarters of a year behind on their water payments. The shut-off would affect around 22,000 accounts which are currently delinquent, representing about $40 million in loss revenue to the city.
“If the customer cannot bring their account to good standing, they certainly can contact our customer support services division . . . We’ll be more than happy to look over the account with them and perhaps work out a payment plan arrangement.”
According to Francis, however, working with the Department of Public Works has not been so simple, and the department’s attitude towards delinquent accounts has not been very “homeowner friendly.”
“If you go on [the Department of Public Works] web page, it’s not going to tell [homeowners] what to do, it’s not going to tell you about an informal conference (where you can negotiate with the department over a delinquent account) and how you can request one. We had to get a copy and pass it around to various folks because you can’t even get a copy for how you submit for informal conference. So it’s sort of like ‘hide the ball’ with the homeowner who’s going to lose their house,” said Francis.
That could change in the future as the city also announced on March 27 the creation of a new tax sale service coordinator position (or ombudsman), which Henry Raymond, director of Baltimore’s Department of Finance, called part of the Rawlings-Blake administration’s “ongoing efforts to protect financially fragile and elderly homeowners in the city.”
The coordinator position will not be created until July 1, but its duties include training city staff to better assist homeowners in danger of a tax sale. Raymond notes that the city had raised its tax sale threshold for unpaid water bills in 2011 to $350 in order to give homeowners more time to address a delinquency, but notes that the city’s finances and operations are affected by outstanding accounts, whether for water or property taxes.
“Delinquent water bills are going to inhibit the operation of the water and waste water utility funds. Other delinquencies, i.e. things like real property bills, environmental citations, et cetera, would inhibit general operations of city government because real property revenue is used for general government operations, whether it be public safety, better housing, things of that nature,” said Raymond.
For homeowners in need of free legal advice regarding the tax sale process, the Maryland Volunteer Lawyers Service will be holding tax sale clinics on April 9 (9 a.m. to 2:30 p.m. at the Urban Business Center, 1200 W. Baltimore Street), April 15 (3 p.m. to 7 p.m. at the Enoch Pratt Free Library, Southeast Anchor Branch, 3601 Eastern Ave.), and April 22 (1 p.m. to 5 p.m. at 4501 Reisterstown Road).