New Bedford City Council looks at tax-debt issue behind lawsuit against the city

NEW BEDFORD — A lawsuit claiming a 66-year-old disabled retiree lost her home and more than $200,000 in equity for less than $10,000 in delinquent taxes has city councilors looking at the tax-delinquent process.

Without getting into specifics on the current lawsuit, Councilor Naomi Carney asked whether it was possible for someone to lose their $250,000 home for $20,000 in delinquent taxes if the lien had been sold to an outside collector.

“Yes, conceivably, yes,” said Treasurer Collector R. Renee Fernandes during a meeting of the committee on ordinances Monday.

But, she said, the city does try to work with tax delinquent property owners. Five-year payment agreements can be made, offering 50% off on the interest rate over that time.

Home equity theft?: How this New Bedford retiree lost her house over $10,000 in tax debt

However, she said, when the city sells the lien to a collector, that collector then has all the rights possessed by the city under state law to charge 16% interest, to foreclose, and to sell the property at auction.

State law further allows the collector to pocket all the equity instead of just the amount and interest owed. Massachusetts is one of a dozen states that allow this practice.

The Deborah Foss lawsuit

The lawsuit in question was brought by 66-year-old resident Deborah Foss, who is represented by the libertarian Pacific Legal Foundation, a national non-profit “that defends Americans’ liberties when threatened by government overreach and abuse,” according to its website.

She went from starting an exciting new chapter in her life when she bought her home at 17-19 Valentine St. in 2015 to losing the house, all the equity, and living out of her car, according to the lawsuit.

She spent her life savings and an inheritance from her mother in 2015 to buy the property for $168,500, where she lived with her wife and twin sister, according to the lawsuit.

Foss was unable to pay her property taxes in 2016 due to medical and financial problems, and the city initiated a tax taking for $3,748 in December 2016.

On June 4, 2018, the city assigned tax title, in effect selling the lien, to Tallage Davis, a real estate investment company headquartered in Boston. The amount had grown to $9,626.19, including $1,361.76 in accrued interest.

Nine days after purchasing the lien, Tallage filed a complaint in Land Court against Foss to foreclose, according to the lawsuit.

Tallage eventually sold the property for $242,000 in 2021, which was $232,373.81 more than it paid for the lien.

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Fernandes said the city hadn’t sold liens for the past two years. It did, though, from 2016 to 2019, and Tallage was the lone buyer. She said the city would advertise the liens availability for bids, and Tallage was the lone successful bidder during that time period.

How the city started selling tax liens to private companies

City Council legal counsel David Gerwatowski said the council had approved the practice of selling tax liens several years ago, though there was debate whether it was advisable since an outside company would be motivated only by profit. People could be reduced to “a number.”

City Councilor Linda Morad said she was “totally opposed” to the idea when it was first brought forward. “And I feel the same way today.”

Fernandes said it wasn’t in her office’s authority to abate taxes, but that they did try to work with people.

“When we are aware of the facts, we go the extra mile,” she said, and will attempt to contact other agencies like Bristol Elder Services. They can also offer the five-year payment agreement and 50% mitigation on interest prior to selling liens. But the tax debtor will need 20% to put down. “It’s still a lot of money,” she said.

The council committee on ordinances voted to table the issue for six months in deference to the ongoing litigation. Committee Chair Hugh Dunn said the lawsuit, filed in late March in Bristol County Superior Court, could end up in federal court.

Fernandes said the case was anticipated to take three years to adjudicate.

This article originally appeared on Standard-Times: New Bedford City Council looks at tax-debt issue that spurred lawsuit