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As real estate tax foreclosure sales will be taking place again in Philadelphia, it is as good a time as any to review how the appellate courts in Pennsylvania have recently addressed challenges to real estate tax foreclosure sales.

Earlier this year, the Pennsylvania Commonwealth Court in In re Sale of Tax Delinquent Property on October 19, 2020, 308 A.2d 890 (Pa. Commw. Ct. 2024), found that a real estate tax sale was properly voided where the County Tax Claim Bureau failed to provide a property owner with actual notice of the real estate tax delinquency and where it failed to establish on the record that it met all notice requirements under Pennsylvania law.

The property owner owned two neighboring properties in Fayette County, Pennsylvania, the opinion said. She resided at one property and leased the neighboring property to a local automobile repair business.

In March 2019, the bureau notified the property owner that she owed $809.25 in delinquent real estate taxes for 2018 on the rented property and that failure to pay those real estate taxes could result in the property being sold at a real estate tax foreclosure sale.

In 2018, 2019 and 2020, the property owner paid real estate taxes on both properties, the opinion said. However, because she believed that the real estate taxes on the rented property were current, she did not pay the alleged real estate tax arrearage for 2018, the opinion said.

On July 6, 2020, the bureau posted a notice of real estate tax delinquency at the rented property.

Thereafter, on Aug. 24, 2020, the property owner went to the bureau’s office and paid $1,000 in person to satisfy the delinquent real estate taxes in 2018 as well as part of the real estate taxes in 2019 on the property where she lived, believing that her personal residence was at risk of real estate tax foreclosure sale.

On Sept. 25, 2020, the bureau sent the property owner a 10-day notice of real estate tax foreclosure sale. Subsequently, a bidder purchased the rented property at the real estate foreclosure tax sale on Oct. 19, 2020, and the bureau notified the property owner of the same.

The next day, the property owner filed a petition in an attempt to overturn the real estate tax foreclosure sale. Subsequently, the bidder at the real estate foreclosure tax sale filed a petition to intervene in the court proceedings, which was granted.

After a hearing on Dec. 22, 2020, the trial court ruled that the property owner had not been given actual notice of the real estate tax foreclosure sale and overturned it.

The bidder at the real estate tax foreclosure sale then appealed to the trial court’s ruling to the Commonwealth Court.

On appeal, the bidder at the real estate tax foreclosure sale argued that the trial court abused its discretion by concluding that: the property owner’s confusion about which real estate taxes she owed constituted lack of actual notice; the bureau had a duty to assist the property owner in identifying which real estate taxes she owed; and the trial court could have applied equity to overturn the real estate tax foreclosure sale even where the bureau had complied with the law.

The Commonwealth Court began its analysis with the truism that tax collection may not be implemented without due process of law.

According to the Commonwealth Court, a property owner’s right to notice before a tax sale is protected by 14th Amendment of the U.S. Constitution and by the Real Estate Tax Sale Law (RETSL), 72 P.S. Section 5860.101, et seq. The due process requirements under state and federal law are satisfied when a property owner facing a loss of property receives notice that is reasonably calculated, under the circumstances, to advise them of their rights and notifies them of an opportunity to present objections.

The RETSL provides certain notice requirements that a tax claim bureau must satisfy in advance of a real estate tax foreclosure sale.

Under the RETSL, at least 30 days before the real estate tax foreclosure sale, the tax claim bureau is required to send the property owner notice of the impending real estate tax foreclosure sale by way of certified mail, restricted delivery, return receipt requested, with postage prepaid.

Additionally, pursuant to the RETSL, 30 days before the real estate tax foreclosure sale, the tax claim bureau must give notice in two newspapers of general circulation in the county (if so many exist) and in one legal journal, if one has been designated by the court for publication of legal notices.

The RETSL states that the required notices must include the purpose of the real estate tax foreclosure sale, the date and time of the real estate tax foreclosure sale, the place of the real estate tax foreclosure sale, the terms and estimated price of the real estate tax foreclosure sale, a description of the property that will be subject to the real estate tax foreclosure sale, and the property owner’s name.

Furthermore, the RETSL requires that the notice of the real estate tax foreclosure sale must be posted at the property at least 10 days before the real estate tax foreclosure sale.

In the trial court, the bureau did not testify or introduce evidence that it published notice of the real estate tax foreclosure sale. Even worse, the Bureau did not introduce evidence of its written correspondence with the property owner regarding the alleged delinquent real estate taxes in 2018.

Also, in the trial court, the property owner testified that she believed she was current on her real estate taxes in 2018 for the rented property and, had the bureau specifically advised her that she was not, she would have paid them. However, the property owner also testified at the trial court proceedings that she received a 10-day letter from the bureau.

The trial court found the property owner’s testimony credible and noted specifically that, despite appearing to pay real estate taxes at the bureau in person, the bureau never advised her that she should pay the alleged delinquent real estate taxes in 2018.

The trial court held that, under these circumstances, the bureau effectively deprived the property owner of her due process rights.

Reviewing the record below, the Commonwealth Court opined that it was improper for the trial court to rely upon equitable considerations to overturn the real estate tax foreclosure sale, observing that where rights are clearly established by law, equity should not alter those rights. Rather, the Commonwealth Court emphasized that the rights and obligations of the parties are established under the RETSL.

However, the Commonwealth Court also held that the RETSL establishes a high bar for due process, since the RETSL is intended to aid in collection of taxes, not to divest property owners of their property.

Accordingly, the Commonwealth Court pointed out that a tax claim bureau must demonstrate strict compliance with the law, and, moreover, has the burden of proving such compliance.

Turning back to the record established in the trial court, the Commonwealth Court noted that the bureau failed to provide its correspondence with the property owner, the notice posted at the property stated the incorrect date for the real estate tax foreclosure sale, and the bureau did not provide testimony or evidence demonstrating that it published notice of the real estate tax foreclosure sale.

Under these circumstances, the Commonwealth Court concluded that the bureau failed to give the property owner the due process to which she was entitled prior to the real estate tax foreclosure sale. In fact, the Commonwealth Court held that the bureau’s failure to provide proof of publication was on its own a sufficient basis to overturn the real estate tax foreclosure sale.

Since the Commonwealth Court upheld the overturning of the real estate tax foreclosure sale on these grounds, it did not address the issue of whether the property owner’s claims regarding whether she had received actual notice of the real estate tax foreclosure sale.

This recent opinion handed down by the Commonwealth Court highlights the importance of strict adherence to the RETSL and may present opportunities for property owners who can demonstrate that a tax claim bureau failed to do so.

Alan Nochumson is the principal of Nochumson P.C., a legal services firm with a focus on real estate, land use and zoning, litigation, and business counseling for the people of Pennsylvania and New Jersey. Nochumson is a frequent author and lecturer on issues commonly confronting businesses, individuals and professionals. You can reach him at 215-600-2851 or alan.nochumson@nochumson.com.

Alex Hamilton is an associate attorney at the firm. You can reach him at 215-399-1346 or alex.hamilton@nochumson.com.