The District can limit the number of properties it puts up for sale during the annual delinquent tax auction, a D.C. Superior Court judge has ruled, reversing an earlier order in which she chastised the city government for flouting the law.
The Office of Tax and Revenue has “some discretion” in how it holds tax sales, Judge Brook Hedge said last week. That includes, as OTR sought, only auctioning those properties with unpaid tax bills of $1,200 or more. Of the nearly 5,000 properties that remain delinquent, according to the tax office, 2,026 owe less than $1,200 and will therefore not be sold at auction.
Chicago-based Aeon Financial LLC, a giant in municipal tax lien purchases, sued the District in early September to have every delinquent property put on the auction block. The company argued that D.C. law requires the sale of “all real property on which the tax is in arrears unless otherwise provided by law.”
Auctioning fewer properties allows a short-staffed OTR to more effectively process the sales, the agency has maintained.
Hedge initially disagreed and on Sept. 10 issued a preliminary injunction stopping the auction, virtually flogging the city in the process.
The judge at the time found the District’s argument “glib” and its decision to withhold certain properties “effectively … eviscerating the statute.”
The District drew a $1,000 threshold during the 2008 tax sale.
Aeon purchased 445 liens last year, 35 percent of all sold, for $4.6 million, according to the firm’s complaint. The harm to Aeon of limiting the number of properties sold would be “irreparable,” the firm argued.
Malik Tuma, Aeon’s attorney, did not return calls for comment.
OTR has rescheduled the 2009 tax sale for Nov. 30.
While Hedge reversed herself, she also ruled that the District’s manner of establishing the tax sale criteria — through an emergency rule making — was improper because no emergency existed.
During the tax sale, investors buy the liens on properties with delinquent tax bills, giving them the option of starting foreclosure proceedings later. The property owner usually pays up before the title is transferred, and the lienholder is refunded his or her money plus interest.
