Commonwealth Court Recently Upholds Tax Sales In Philadelphia
Written by: Alan Nochumson
For the past several years, the city of Philadelphia has made a concerted effort to sell tax delinquent properties through the tax foreclosure sale process under the Municipal Claims and Tax Lien Act, 53 P.S. Section 7101 et seq.
In a pair of rulings handed down by the Commonwealth Court within the past two months, desperate attempts by property owners to overturn tax sales orchestrated by the city have failed miserably.
In City of Philadelphia v. Ahmed, 2015 Pa. Commw. Unpub. LEXIS 831 (November 13, 2015), the Commonwealth Court upheld a tax sale that took place despite allegations that the City of Philadelphia Law Department agreed to postpone the scheduled tax sale.
In Ahmed, the property owner retained the services of an attorney to negotiate the postponement of the scheduled tax sale with the department, the opinion said. According to the attorney representing the property owner, the department agreed to postpone the tax sale on behalf of the city until a later date, but the attorney never confirmed the existence of this alleged agreement in writing prior to the date of the scheduled tax sale or obtained a court order formally postponing the tax sale, the opinion said.
The city, not believing that it had entered into such an agreement to postpone the tax sale, sold the property as scheduled, the opinion said.
The property owner then filed a petition to set aside the tax sale based upon the city’s alleged failure to postpone the tax sale as agreed to by the parties, the opinion said.
In the hearing in furtherance of the petition, the city admitted that discussions did take place with the attorney representing the property owner about postponing the tax sale, but that the attorney was informed by representatives from the department that the city would not agree to postpone the tax sale unless it received a payment of $2,000 from the property owner prior to the tax sale, the opinion said. According to the city, it never advised the attorney that the tax sale would be postponed and never received the aforementioned payment from the property owner, the opinion said.
After the hearing, the trial court denied the petition, concluding that the property owner failed to establish by clear and convincing evidence that the property owner was entitled to equitable relief in setting aside the tax sale.
The property owner then appealed the trial court’s ruling to the Commonwealth Court.
In a memorandum opinion issued by Judge Rochelle S. Friedman, the Commonwealth Court held that the trial court judge did not abuse her discretion in making the aforementioned factual findings.
In a concurring opinion, Judge Mary Hannah Leavitt emphasized that the discussions that took place between the department and the property owner’s attorney should be deemed of no relevance.
Leavitt did note that some taxing authorities in jurisdictions outside of the city are statutorily required to offer a property owner, who pays at least 25 percent of the outstanding real estate taxes, an installment payment plan for the remaining real estate tax balance, and, if a payment plan is not offered, the tax sale will be set aside. Unlike these other statutes, Leavitt pointed out that the city is governed by the act, which does not contain a similar requirement, and the city is, thus, “free to do what it did in this case, i.e., take substantial payments as a ‘courtesy.'”
In an unrelated matter, the Commonwealth Court in City of Philadelphia v. Lawrence, 2015 Pa. Commw. Unpub. LEXIS 779 (October 28, 2015), denied an appeal of a trial court’s denial of a petition to set aside a tax sale under the theory that the property owner failed to file the petition within the statutorily mandated period of time under the act.
In Lawrence, after the property owners failed to respond to a petition filed by the city requesting judicial permission to schedule the sale of the property via a tax sale, the trial court issued a decree allowing the city to so sell the property, the opinion said.
After the property was sold to a third party at the tax sale, the sheriff of Philadelphia returned the underlying writ of execution upon the grounds that “terms of sale not complied with” and the sheriff of Philadelphia so marked it on the docket in the real estate tax foreclosure case, the opinion said.
After the tax sale already took place in Lawrence, a proposed installment payment plan for the delinquent real estate taxes was generated and mailed by the city’s counsel at the request of one of the property owners, the opinion said. Shortly thereafter, the Sheriff’s Department advised the city’s counsel that the docket entry was made in error and that the tax sale had been duly completed by the tax sale bidder, the opinion said. As a result, the proposed installment payment plan was not signed by the city, and the checks sent by one of the property owners to the city were voided and returned to her, the opinion said. The city’s counsel then informed the property owners that the sale of the property was valid, and the sheriff’s deed for the property was acknowledged and recorded, the opinion said.
Approximately a year after the sheriff’s deed was acknowledged, the property owners filed a petition to set aside the tax sale.
Both the city and the new property owner argued that the petition should be denied due to the untimeliness of its filing.
Under 53 P.S. Section 7193.3, “all parties wishing to contest the validity of any sale conducted pursuant to [the act], including the sufficiency of any notice, and any party claiming to have an interest in the premises which was not discharged by the sale must file a petition seeking to overturn the sale or to establish the interest within three months of the acknowledgment of the deed to the premises by the sheriff.”
After the petition was denied by the trial court, the property owners appealed the trial court’s ruling to the Commonwealth Court.
On appeal, the Commonwealth Court upheld the trial court’s ruling based upon the untimeliness of the filing of the petition.
The Commonwealth Court pointed out that the property owners elected to wait to challenge the merits of the tax foreclosure process for approximately a year after being notified by the city that the city could not enter into an installment payment plan because the tax sale was valid. In doing so, according to the Commonwealth Court, the property owners filed a petition well outside of the three-month timeframe allotted to contest the validity of the tax sale.
LESSONS LEARNED
The recent rulings made by the Commonwealth Court illustrate the importance of dotting all of your i’s and crossing all of your t’s during the tax foreclosure process in Philadelphia.
In Ahmed, from what was stated in the memorandum opinion, it seems like the property owner did not properly postpone the tax sale. Even assuming an agreement to postpone the tax sale had been reached between the parties, it was incumbent upon the property owners to memorialize the agreement in writing. From experience, written confirmation from the City Law Department via an email will suffice and, if such an agreement cannot be confirmed in writing, the property owner must file a petition to postpone the tax sale with the trial court on an emergency basis prior to the tax sale taking place.
As for what happened in Lawrence, the property owner must be vigilant in attacking the validity of the tax sale. As noted by the Commonwealth Court in Lawrence, a property owner in Philadelphia must file the petition within three months from the acknowledgement of the sheriff’s deed, and, if the property owner fails to do so, the property owner waives his or her arguments to set aside the tax sale. In Lawrence, the Commonwealth Court pointed out that the property owners had actual notice that the tax sale took place when they attempted to enter into a payment plan with the city. The question remains for another day if a property owner would be prevented from attacking the validity of the tax sale outside the aforementioned three-month period of time if the property owner had no notice of the tax sale. I assume that question will be answered someday.
Reprinted with permission from the December 15, 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, reprints@alm.com or visit www.almreprints.com.
