Court Expands Scope Of Right To Redeem Property Sold At Tax Sale
Written by: Alan Nochumson
An opinion recently issued by the Commonwealth Court may have dramatically changed the way tax sales in Philadelphia are viewed by delinquent property owners and third-party bidders.
In City of Philadelphia v. F.A. Realty Investors, 2014 Pa. Commw. LEXIS 341 (June 27, 2014), the Commonwealth Court held that a property owner in Philadelphia may redeem a property sold at a tax sale, without restriction, under the Municipal Claims and Tax Liens Act, 53 P.S. § 7101 et seq., so long as the property owner exercises this right of redemption prior to the acknowledgment of the sheriff’s deed.
In F.A. Realty Investors, at the time the tax sale occurred, the property was a vacant residential property, the opinion stated. Two weeks after the tax sale took place, the property owner filed a petition with the trial court, exercising its right to redeem the property under the act by agreeing to pay the tax arrearage as well as all of the costs associated with the tax sale, the opinion said. The petition was filed by the property owner prior to the third-party bidder paying the balance of the auction price. Since the balance of the auction price was unpaid at the time, the sheriff never acknowledged the deed transferring the property to the third-party bidder.
According to the opinion, the property owner’s petition to redeem the property was denied by the trial court as being premature based upon the trial court’s interpretation of 53 P.S. Section 7293(a), which specifically provides that a property owner has the right to redeem a property after it is sold at a tax sale “at any time within nine months from the date the acknowledgement of the sheriff’s deed.” The trial court believed that, since the sheriff’s deed was not acknowledged prior to the filing of the petition, the property owner had no right to exercise its right of redemption and the property owner first had to wait for the sheriff’s deed to be acknowledged in order to file the petition.
The trial court also denied the petition as the property was deemed “vacant” under 53 P.S. Section 7293(c).
Under the act, a property owner’s right of redemption does not apply to a vacant property and, according to Section 7293(c), a property is deemed “vacant” unless the property owner sets forth facts showing that the property was “continually occupied by the same individual or basic family unit as a residence for at least 90 days prior to the date of the sale and continues to be so occupied on the date of the acknowledgement of the sheriff’s deed therefor.” As it was undisputed by the parties that the property was unoccupied at the time the tax sale took place, the trial court concluded that the property owner in F.A. Realty Investors was precluded under Section 7293(c) to exercise its right of redemption under the act.
On appeal, the Commonwealth Court ruled that the trial court incorrectly interpreted these cited sections of the act and remanded the matter back to the trial court for further proceedings.
In the opinion, the Commonwealth Court, among other things, tackled when a petition to redeem a property under the act may be filed by a property owner.
While the city of Philadelphia asserted that a property owner had to wait for the acknowledgement of the sheriff’s deed before being able to file a petition to redeem a property and could only file the petition within nine months after the date of acknowledgement, the property owner in F.A. Realty Investors argued that such a petition may be filed at any time until nine months after the sheriff’s deed has been acknowledged.
Under the rules of statutory construction, the Commonwealth Court pointed out that “it is presumed that the legislature does not intend an absurd result” and that “when the words of a statute are not explicit, the intention of the General Assembly may be ascertained by considering the consequences of particular interpretation.” In doing so, the Commonwealth Court held that the “redemption statute is to be liberally construed so as to effect its object and to promote justice.”
In the opinion of the Commonwealth Court, the purpose of tax sales is to recover delinquent taxes and by filing the petition to redeem the property owner has declared he or she is capable of doing so.
The Commonwealth Court explained that the city’s interpretation of the act would lead to an absurd result. If the property owner had to wait to file a petition to redeem a property subsequent to the acknowledgement of the sheriff’s deed, the Commonwealth Court pointed out it would cause a delay in the collection of the delinquent taxes and force the bidder to expend more time and money on the property that could ultimately be redeemed.
In order to avoid such an absurd result, the Commonwealth Court concluded that a property owner under the act would have a right to redeem their property any time prior to nine months after the date that the sheriff’s deed is acknowledged. In so concluding, the Commonwealth Court held that the property owner’s petition in F.A. Realty Investors was properly filed.
The Commonwealth Court also addressed whether the property owner in F.A. Realty Investors even had the right to exercise its right to redeem the property since the property was vacant at the time the tax sale took place.
The property owner argued that Section 7293(c), which precludes a property owner from redeeming a vacant property under the act, only applies if the petition to redeem the property is filed after the sheriff’s deed is acknowledged. On the other hand, the city maintained that a vacant property is never redeemable pursuant to Section 7293(c).
Similar to the Commonwealth Court’s interpretation of Section 7293(a), the Commonwealth Court stated the plain language of Section 7293(c) did not specifically provide such a restriction upon a property owner to redeem the property.
The Commonwealth Court noted that “the legislature did not use language … that prohibits the redemption of vacant property prior to the acknowledgment of the sheriff’s deed.” As such, the Commonwealth Court indicated it is consistent to allow redemption of a vacant property before the sheriff’s deed is acknowledged, but expressly not after.
LESSONS LEARNED
For all intents and purposes, the Commonwealth Court’s ruling in F.A. Realty Investors expanded the scope of the right to redeem a property sold at a tax sale in Philadelphia. Previously, trial court judges in Philadelphia routinely denied petitions to redeem filed under the act prior to the acknowledgement of the sheriff’s deed and if the property was not an occupied residential property at the time the tax sale occurred and through the issuance of the sheriff’s deed.
As a result of this ruling, commercial property owners and property owners of other “vacant” properties in Philadelphia now possess an avenue of relief that did not exist until now. In order to preserve this right to redeem the property under the act, such petitions should be filed before the sheriff’s deed is acknowledged. While, from my experience, it takes several months from the time of the tax sale for a sheriff’s deed to be acknowledged, it would be prudent for such petitions to be filed expeditiously for obvious reasons.
Reprinted with permission from the July 15, 2014 edition of The Legal Intelligencer © 2014 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited. For information, contact 877-257-3382, reprints@alm.com or visit https://almreprints.com/.
