Recent Commonwealth Court Ruling Underscores Importance of Tax Sale Notice Requirements

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.

Background of the Case

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.

Events Leading to the Sale

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.

Legal Challenge and Trial Court Ruling

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.

Appeal to the Commonwealth Court

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.

Due Process and RETSL Requirements

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.

Failure to Meet Notice Requirements

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.

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.

Commonwealth Court’s Conclusion

Reviewing the record below, the Commonwealth Court emphasized that the rights and obligations of the parties are established under the RETSL and that a tax claim bureau must demonstrate strict compliance with the law.

The bureau failed to provide its correspondence with the property owner, the posted notice included an incorrect date, and it failed to prove that public notice was published as required.

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. Its failure to provide proof of publication alone was sufficient to overturn the sale.

Final Takeaway

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.

Authorship

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.