Although this is the first tax lien sale of this type in Philadelphia, the city has ambitiously proposed for the sale to occur on or before June 17, 2015, but it maintains discretion to cancel the sale.
The City of Philadelphia recently announced a request for proposals to implement an online auction for the sale and assignment of some of the city's delinquent real estate tax liens. The auction will allow third parties to bid on the tax liens, with the successful bidder assigned the lien from the city upon the purchaser's payment at the conclusion of the auction. Title to the property against which the delinquent tax lien is sold will not be transferred. The third-party assignee would then pursue the collection of the delinquent taxes from the property owner.
The properties for which liens will be assigned will be restricted to those with delinquent tax balances greater than $1,000, which are not related to a non-profit entity, and to those who do not have an active appeal with the Tax Review Board. Certain liens will be sold in bundles, while others will be sold individually.
Since costs incurred in connection with the auction will be added to the delinquent account, and the Municipal Claims and Tax Liens Act (53 P.S. § 7101, et seq.) under which the liens will be assigned allows for a maximum interest rate of 10-percent per annum, as well as counsel fees and costs of enforcement to be collected by the third-party purchaser, lenders holding mortgages secured by property in Philadelphia may wish to conduct a review of tax payment statuses, identify potential targets of the tax lien sale and proactively address the tax delinquencies for properties that appear to fall within the scope of the auction. The city's proposal provides for notice of the sale to be delivered only to property owners (i.e., not to lienholders); however, a list of properties for which liens will be sold will be made available prior to the auction.
It is not unusual for a Pennsylvania county to assign its interest in real estate tax liens in bulk to a third-party collector. See, e.g., Pentlong Corp. v. GLS Capital, Inc., 72 A.3d 818 (Pa. Commw. Ct. 2013). However, the proposed sale by the City of Philadelphia appears unique in that it will allow third-party investors to also bid on individual liens, similar in concept to the sale of tax sale certificates in New Jersey. Although this is the first tax lien sale of this type in Philadelphia, the city has ambitiously proposed for the sale to occur on or before June 17, 2015, but it maintains discretion to cancel the sale.
For Further Information
If you have any questions about this Alert, please contact Brett L. Messinger, Louise S. Melchor, any of the attorneys in our Bank and Financial Institution Representation Practice Group or the attorney in the firm with whom you are regularly in contact.
Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.