Worcester woman could lose her home over old tax bill: Here's how it could happen

WORCESTER – Nancy Rodriguez can’t believe what happened to her, and she’s gone to court to make sure it doesn’t happen to others.

“It’s been a nightmare,” said Rodriguez.

The nightmare started in August when Rodriguez said she received a letter in the mail informing her that she no longer owned her home at 24 Tatman St. because of unpaid property taxes.

Rodriguez bought her home in 1996, paid off the mortgage in 2020 and thought she built up substantial home equity, giving her peace of mind. The letter left Rodriguez shocked and confused, and she called the city to find out what was going on.

“When I called the city, and I gave my address to the lady, she said you’re not the owner. I was blown away, this is crazy. I’ve never heard such a thing. Who steals a home, and you don't even know it?”

No guarantee because of Mass. law

According to city records, the home’s assessed value is $291,500, but there’s no guarantee Rodriguez will keep any of the equity she earned. She could lose it all because of a Massachusetts law that has been on the books since the early 20th century.

Massachusetts General Laws Chapter 60 gives cities and towns the right to sell a property not only to recoup unpaid property taxes but also to keep the equity. Unpaid water and sewer bills also fall under the law.

Municipalities can also sell a tax lien to a third party that can evict the homeowner, foreclose and keep the equity. The Bay State is one of roughly a dozen U.S. states that have such a law.

Health problems started chain of events

Troubles started when Rodriguez said she had to quit her job because of health problems. She worked the overnight shift for 37 years at a T.J. Maxx warehouse in Worcester, and with no job and loss of income, Rodriguez had a hard time paying her bills.

One of her bills was an overdue property tax balance of $2,256.

According to Rodriguez’s legal complaint filed in U.S. Bankruptcy Court, the City of Worcester put a lien on her home and sold it to Tallage LLC, a private real estate investment company in Boston. Tallage paid Worcester $3,370.60 in June 2019 for the lien, an amount that covered the unpaid balance and administrative costs.

Defendants named in the lawsuit include the City of Worcester; Timothy McGourthy, the city's chief financial officer; and Tallage Davis LLC. All three filed motions to dismiss the complaint.

Tallage got a foreclosure judgment in Massachusetts Land Court. The judgement barred Rodriguez’s right of redemption, which essentially meant she could no longer work within the legal system to pay off her tax debt. At that point, Tallage took full ownership of the home.

Rodriguez said she wasn’t aware of any of this and didn't receive any notices from the city of Worcester or the state Land Court. The first letter from Tallage that arrived in August was the first time she got wind of what was happening, and Rodriguez continues to live in the home as the legal battle plays out.

A Worcester spokesman said the city doesn't comment on legal issues concerning pending litigation. The spokesman's email pointed out that Worcester did not foreclose on the property at issue, nor would it obtain any surplus as a result of a sale of the property by the third party.

Calls to Tallage owner Bill Cowen were not returned. Daniel Hill, general counsel at Tallage, did not respond to requests for comment.

Not going down without a fight

After more than 20 years in her home, Rodriguez decided she wasn’t going down without a fight.

“I’m not going to make it easy for them to take my home. I worked hard. People get sick and fall behind (on payments). Situations happen in life.”

Rodriguez is getting free legal representation from Greater Boston Legal Services; Morgan, Lewis & Bockius LLP; and the Pioneer Public Interest Law Center. In May, her legal team filed a complaint in U.S. Bankruptcy Court to recover the home. Rodriguez is also challenging the constitutionality of the Massachusetts law that allows municipalities and third parties to accumulate equity after unpaid taxes are settled.

Last month, the Land Court dropped the foreclosure judgement against Rodriguez, after Tallage requested it. Tallage is pursuing foreclosure, said Todd Kaplan, a member of Rodriguez's legal team. Kaplan explained Tallage claims its owed roughly $80,000 for taxes and bills it paid on the property.

Isolated case, or does Worcester sell tax liens to third parties?

It’s unclear if Worcester forecloses on properties to recover unpaid taxes, or how often it sells liens to third parties. The latter practice dates back in Worcester to at least 2008, according to a 2015 ruling in state Land Court.

“Since May 2008, Worcester has auctioned its tax receivables,” wrote Judge Keith Long in his ruling.

In that court case, Paul and Michele Meaney owned a three-decker at 28 Caro St. They had health problems and fell behind on bills. The couple owed a $224.58 water bill and a $267.93 sewer charge, and Worcester sold the lien to Tallage.

The company secured a foreclosure judgment in Land Court that ended the Meaneys' right of redemption. Tallage immediately sold the property to a third party, and it happened within the one-year period that the court has discretion to vacate the judgment.

Ultimately, Long ruled in favor of the Meaneys, they got their property back, and they paid Tallage $4,599.91 for the redemption.

Privatization: 'It's not a good thing'

Peter Brown, founder of Brown Legal in Boston, represents cities and towns that collect back taxes. "Privatization” is how Brown described the inclusion of third parties in municipal tax collection, and he’s against it.

“I don't believe in that practice. It’s not a good thing, and I don’t represent parties involved in this.”

Brown can understand why some communities sell tax liens. They need money owed to meet financial obligations without going through the long, expensive slog of a court fight.

“It’s a shortcut,” said Brown. "In the private tax lien world, bad things happen that should not have happened. That can’t be debated.”

Puzzled: Why is Worcester leaving cash on table?

Kaplan, senior attorney at Greater Boston Legal Services, is puzzled that Worcester gives up a financial windfall to third parties like Tallage. Kaplan equates the money Worcester could be making to how a casino operates, where the system is rigged to benefit the house, not the gambler.

“What incentive does Worcester have to give up all that money?” said Kaplan. “It’s like if you go to a casino and you only knew that you would win. Why not go there and win? It's a sure winner. That's why Tallage buys dozens of tax titles.”

Frank Bailey wonders the same thing. Bailey is the president at the Pioneer Public Interest Law Center and a retired chief judge in the U.S. Bankruptcy Court for the District of Massachusetts.

“It’s a head-scratcher,” said Bailey, who also believes homeowners should receive all equity after a property is sold at foreclosure. At a minimum, Bailey feels cities and towns should make agreements with third parties to split the equity proceeds after a sale so funds go back into city coffers to benefit all local taxpayers.

Bailey pointed out that as soon as a homeowner is late paying taxes, the interest rate kicks in at 14%. It jumps to 16% when the tax lien is recorded. Those high interest rates are why many third parties buy a lien, according to Bailey.

What about the law? Will courts, lawmakers strike it down?

There appears to be momentum to amend the existing law, so homeowners can retain equity while paying down any taxes owed.

In May, the U.S. Supreme Court unanimously ruled that a Minnesota law that allowed a county to keep $25,000 in equity on a $15,000 tax debt violated the Takings Clause of the Fifth Amendment in the U.S. Constitution. The clause prevents the taking of private property for public use, without just compensation.

Pending bills at the Statehouse call for striking down the equity-taking provision. Previous bills never made it out of legislative sessions.

Meanwhile, Pat Moore, first assistant attorney general under state AG Andrea Campbell, recently weighed in on the matter. Moore told the state’s Joint Committee on Revenue that “the tax lien foreclosure process set forth in Chapter 60 of the General Laws is unconstitutional.”

Bailey predicts that the state or federal courts, possibly both, will use the Supreme Court ruling as impetus to invalidate aspects of Chapter 60 sometime this year or no later than next year. When asked why state lawmakers didn't change the law prior to the Supreme Court ruling, Bailey noted that lawmakers are “very careful” before making any changes to how cities and towns collect taxes.

Another possible reason cited by Bailey is those harmed by the law generally fall in underrepresented groups, including the elderly and the sick, who may be distracted by their situations and not keeping a close tab on bills, including taxes owed.

"These are often disenfranchised people, often not represented by lawyers," said Bailey. "They don’t have power to get to the Legislature or even to the courts to try to make changes in the law.”

Maintaining a positive attitude

Rodriguez is hoping for the best, but should the worst happen, and she loses her home and equity, she said she could be homeless. She does have a niece in Worcester who could take her in, if needed.

Speaking of her legal fight, Rodriguez said, “We’re doing this for other families, so they don’t have to go through this. There should be a law to protect us from this happening.”

Contact Henry Schwan at henry.schwan@telegram.com. Follow him on Twitter: @henrytelegram.

This article originally appeared on Telegram & Gazette: Equity theft debate: Worcester woman could lose her home over tax bill