Judge halts D.C. tax sale of properties
By: Michael Neibauer
Examiner Staff Writer
September 10, 2009
The District's tax office on Wednesday delayed its annual lien auction after a D.C. Superior Court judge struck down the city's decision to limit the number properties sold based on the amount owed.
Judge Brook Hedge issued her order Tuesday, a day before the scheduled start of the tax sale and a week after the D.C. Office of Tax and Revenue announced it would auction only those properties with back tax bills of $1,200 or more.
"A legal challenge has been made to the District's right to set a threshold for the sale of delinquent real property taxes," the Office of Tax and Revenue said in a statement. "Consequently, the District is reviewing its legal authority to set a threshold for tax sale."
Chicago-based Aeon Financial LLC, which describes itself as "one of the nation's leading purchasers and servicers of delinquent municipal property tax liens," sued to have every property put on the block. D.C. law requires that the "Mayor shall sell all real property on which the tax is in arrears unless otherwise provided by law," the company argued in its Sept. 2 complaint.
Aeon purchased 445 liens during the District's 2008 tax sale, 35 percent of all sold, for $4.6 million, according to the firm's complaint. If the city is allowed to sell certain properties but not others, Aeon alleged, the property owner could rightly claim that "they were denied due process, adequate notice and were subject to de facto economic discrimination in the process of the Tax Sale."
Harm to Aeon would be "irreparable," the firm argued. The District, Hedge wrote in her order granting a preliminary injunction, presented "no evidence" to the contrary.
"The District's glib argument was it could withdraw any property from sale for any time period," she wrote. "That effectively is eviscerating the statute."
During the tax sale, investors buy the liens on properties with delinquent tax bills, giving them the option of starting foreclosure proceedings later. In the vast majority of cases, the property owner pays up before the title is transferred and the lien-holder is refunded their money plus interest.
Roughly 4,900 property owners as of Friday were delinquent in their 2008 real estate taxes. Of those, 2,000 owed less than $1,200, totaling $1.12 million of the $26.5 million due to city coffers.
The District drew a $1,000 threshold during last year's sale, but it was not the subject of a lawsuit.
Aeon's attorney of record, Malik Tuma, did not return calls for comment. Company officials also did not respond to requests for comment.
Richie McKeithen, director of OTR's Real Property Tax Administration, told The Examiner last week that putting a smaller number of properties up for sale "gives us a better opportunity to process this when the tax sale is all over."
