Court Refuses To Allow Bank To Redeem Mortgaged Property

Written by: Alan Nochumson

Last month, the Commonwealth Court in Brentwood Borough School District v. HSBC Bank USA (2015 Pa. Commw. LEXIS 118 (March 24, 2015), handed down yet another ruling clarifying the right under Pennsylvania’s Municipal Claims and Tax Lien Act, 53 P.S. Section 7293, for a property to be redeemed from a successful bidder after a tax sale takes place.

In HSBC Bank USA, the property, which was subject to a mortgage held by HSBC Bank USA N.A. at the time of the tax sale, was sold to a third-party purchaser based on unpaid real estate taxes due on account of the property for the 2006 and 2007 tax years.

The sheriff’s deed transferring the property from the former property owner to the successful bidder was acknowledged by the sheriff June 17, 2011.

Almost five months later, HSBC, as mortgagee, filed a petition for redemption of the foreclosed property under Section 32(a) of the act, which provides that the property owner or any party whose lien or interest in the property has been discharged by the tax sale may redeem the property any time within nine months from the date the sheriff acknowledges the deed transferring the property to the property’s successful bidder.

Section 32(c) of the act, however, specifically disclaims any such right of redemption for “vacant property” after the sheriff’s deed is acknowledged. Under the act, “property shall be deemed to be ‘vacant property’ unless it was continuously 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 acknowledgment of the sheriff’s deed therefore.”

In response to HSBC’s redemption petition, the successful bidder, among other things, argued that, if HSBC wished to redeem the property, it was obligated to do so under the act before the sheriff’s deed was acknowledged.

At the hearing, the successful bidder also submitted an affidavit notarized by the property owner in support of its contention that the property should be deemed “vacant” under the act. In the affidavit, the property owner stated that: she “did not continually occupy the property as [her] residence,” “during that time, the gas service was terminated at the property and [she] did not have the means to have the gas service restored,” and, “without hot water or gas for cooking, [she] was unable to continue to reside in the property with [her] children.”

The trial court judge denied HSBC’s redemption petition, finding that HSBC had no right to redeem after the sheriff’s deed was acknowledged because the property was unoccupied at the time of the sale, which meant that the property was “vacant property” for purposes of the act, and because the redemption petition was not timely filed within 90 days of the acknowledgment of the sheriff’s deed.

HSBC then appealed the trial court’s ruling to the Commonwealth Court.

On appeal, HSBC raised the following three issues: (1) whether the trial court erred when it found that the redemption petition was untimely; (2) whether the trial court erred when it found that the property was “vacant” for purposes of the act and, therefore, could not be so redeemed; and (3) whether the trial court’s denial of HSBC’s redemption petition should be reversed as a matter of equity.

In an opinion written by Judge Bernard L. McGinley, the Commonwealth Court ultimately affirmed the trial court’s ruling.

The Commonwealth Court first addressed whether the redemption petition was timely filed.

In a footnote, the court pointed out that the trial court judge applied the incorrect statute when deciding whether HSBC’s redemption petition was filed in a timely fashion. According to the Commonwealth Court, the trial court judge mistakenly relied upon the 90-day deadline set forth in the statute, which is applied to sales held for the collection of municipal liens and taxes for properties located in the city of Pittsburgh. As the property is located in the Borough of Brentwood, the Commonwealth Court found that the tax sale was conducted pursuant to the act, which allowed for the redemption petition to be filed within nine months from the acknowledgment of the sheriff’s sale.

Since there was no dispute that the redemption petition was filed almost five months after the sheriff’s deed was acknowledged, the court concluded that the trial court’s denial of HSBC’s redemption petition upon this basis was an error of law.

The Commonwealth Court then determined whether the property was “vacant” for purposes of the act.

HSBC argued that the property was still “occupied” as the property owner’s residence and there was no evidence that the property owner “moved out” of the property during the relevant time period. In doing so, HSBC pointed out the evidence showed that the property owner temporarily stayed at a friend’s house for a finite duration until she could afford to pay the utility bills and that the property owner left her belongings at the property.

In order to establish that the property was still occupied as the property owner’s residence, HSBC attempted to rely upon the definition of the term “occupied” in other cases and statutes as support for its contention that a temporary absence does not constitute “vacancy” for purposes of the act so long as the occupant intends to return to the property.

The Commonwealth Court was not persuaded by HSBC’s attempt to so define the term “occupied” for purposes of the act. Rather, the court emphasized that the term “occupied” should be interpreted in context of the act.

Bluntly, the Commonwealth Court noted that, “to invoke the right of redemption, under the act, the occupancy must be as a residence, not as a storage unit.”

The Commonwealth Court reiterated that “the only reasonable interpretation of ‘occupied’ as used in the redemption provisions of the act must take into consideration the ability of a municipality to swiftly return abandoned and unused, tax-delinquent property which is currently uninhabitable or uninhabited due to damage, disrepair or, as in this instance, nonpayment of utilities, back to productive use,” and that, “from the very limited period within which an owner may redeem a ‘vacant property’ … the legislature did not intend a lengthy redemption period.”

The court declared determining whether a property is “continuously occupied by the same individual or basic family unit as a residence” is “a factual determination which must be made on a case-by-case basis, considering factors, such as: whether anyone was habitually physically present at the property, i.e., regularly sleeping and eating there and using it as a place to dwell; whether any lack of physical presence was due to temporary illness, travel or renovation; whether the property was unsecured, damaged or uninhabitable; and whether the basic and necessary utilities such as water, electric and gas were operational.”

As the record did not show that the property was being habitually and physically used as a residence at the time before or at the time of the tax sale or continuously thereafter through the acknowledgement of the sheriff’s deed, the Commonwealth Court held that “the evidence supported the trial court’s conclusion that the property was vacant and unoccupied and was the sort of property the General Assembly intended to return to the tax rolls and rehabilitate through the sale to a new owner.”

The court then swiftly rejected HSBC’s contention that equity required the reversal of the trial court’s ruling.

In its appeal, HSBC contended that, as the property’s mortgage holder, it possessed a substantial property interest that was significantly affected by the tax sale and it was entitled to notice to be reasonably apprised of what rights would be lost as a result of the tax sale.

The Commonwealth Court noted that HSBC received the requisite notice under the act prior to the tax sale taking place and stated it essentially could not set aside based on some unfounded equitable principles under these circumstances.


The Commonwealth Court’s opinion in HSBC Bank USA adds some structure when determining whether a property should be deemed “vacant” or, in other words, “occupied,” for purposes of the act. As the Commonwealth Court stated with great force, under the act, a property being used as a “storage unit” cannot be redeemed by the property owner. The Commonwealth Court, however, refused to enunciate a bright-line rule when a property should be deemed “vacant” or “occupied.” Instead, the Commonwealth Court set forth factors that will determine whether such right of redemption exists after the sheriff’s deed is acknowledged.

Reprinted with permission from the April 21, 2015 edition of The Legal Intelligencer © 2015 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited. For information, contact 877-257-3382, or visit

Alan Nochumson