On Nov. 5, 2012, Land Court Judge Keith Long sent notice to the
Massachusetts Attorney General pursuant to Mass. R.Civ.P. 24(d)
coupled with a request for amicus briefs on two questions
arising from tax lien cases in which private collection entities
were seeking to foreclose taxpayers' rights of redemption of unpaid
tax bills pursuant to G.L. c. 60, §§ 65-75.
The first question presented was: May property tax collection be
privatized in the manner set forth in G.L. c. 60, § 2C, 45, 52; or
is the collection of property tax a core governmental function that
cannot be privatized at all?
The second question presented was: If such a power can be
privatized, what "safeguards" exist and what is the extent of those
The court also posed the following questions: (a) Is the court's
power limited to the ability to set "payment plans" under which the
full amount owed, principal and interest alike must be paid, or can
the court reduce interest and principal? (b) Can the court appoint
commissioners to sell properties, preserving "surplus" for the
taxpayer and other creditors? (c) Can the court appoint guardians,
receivers or representatives to take action on behalf of absent
heirs, with "escrow" funds established to hold those surplus funds
much like partition cases? See, G.L. c. 241, §§ 9, 22, 31, 34, 35;
and (d) Are remedies other than the setting of payment plans for
the full amount of principal and interest beyond those allowed the
Amicus briefs were submitted by Tallage Adams, LLC, Tallage IMP,
LLC, Tallage Hancock, LLC and Tallage, LLC (collectively Tallage);
the city of Worcester ; Massachusetts Lien Servicing LLC;
Massachusetts Collectors and Treasurers Association (MCTA);
National Tax Lien Association; the town of Hopkinton; Robert C.
Haley, Esq.; Coppola & Coppola; the city of Lawrence; and the
National Consumer Law Center (NCLC).
In each of the tax lien foreclosure cases affected by Long's
order, the petitioners had acquired municipal tax receivables
either by bulk assignment under G.L. c. 60, § 2C, under tax
collector's deeds pursuant to G.L. c. 60, § 45, or by purchasing
tax titles pursuant to G.L. c. 60, § 52. Interest on unpaid
balances accrues at 14 percent from the time taxes are due until
the collector's sale or tax taking occurs, under G.L. c. 59, § 57,
and at 16 percent thereafter pursuant to G.L. c. 60, § 62.
Observing the significant difference in original and current
account balances in the cases before him, Long noted that "[a]
small tax bill," if unpaid, "can … rapidly become much larger … "
and that the "application of 14 percent [to] 16 percent interest
rate and complete loss of equity once redemption rights are
foreclosed" may lead inequitable results, particularly if the
property owner finds it difficult to "catch up" on missed payments.
Long noted that nearly all of the taxpayers were pro se
litigants, one of whom apparently disregarded notices from the
private tax lien holder because she did not believe that it held
her tax title, and expressed concern that the elderly, unemployed,
and heirs who may have difficulty coordinating payment of tax bills
after a parent's death, would be unfairly burdened by the
imposition of such high rates of interest.
Long suggested that private tax foreclosure raises
constitutional because [t]ax foreclosure proceedings brought and
pursued by private entities are outside the political process " …
Such entities are responsible to their investors, not the citizens
of a city or town, and their goals and incentives are not the same.
Maximizing return on investment may not include accommodation to
individual circumstance to the same extent a municipality, acting
for itself, might otherwise deem warranted."
SOURCES OF MUNICIPAL TAX COLLECTION LAW
Municipal tax collection is a technical process with strict
accounting rules that are set forth in General Laws chapters 59 and
60, and clarified in the Collectors and Treasurers Association
Collector's Manual, revised in 2008; and the Informational Guidance
Release (IGR) No. 05-2008, revised June 2005, which Supersedes IGR
97-201 in part.
IS TAX COLLECTION SOLELY A GOVERNMENT
As stated in Worcester's brief, "[w]hen the government provides
protection and services for the benefit of property, that property
… [is] … 'held subject to the reciprocal obligation of meeting, in
its due proportion, the expenses incident to such protection.'"
Worcester Brief at 4, citing WB&T Mortgage Co., Inc. v.
Board of Assessors of Boston, 451 Mass. 716, 722 (2008).
Accordingly, when the owner defaults on that "reciprocal
obligation," municipalities may collect unpaid real estate taxes
and municipal charges in accordance with the procedures set forth
by the Legislature in G.L. c. 60.
Tallage and Worcester explained separately that while tax
assessment and tax collection are municipal functions, the sale of
tax collector deeds or the assignment of tax titles is a
form of collection, not a delegation of a
government function to a non-governmental party. But, even if this
were a delegation of a government function, it is one expressly
permitted by G.L. c. 60, § 2B. Tallage Brief at 3.
When a tax lien buyer pays an outstanding tax bill on the
property owner's behalf, the city or town receives immediate
payment of the outstanding tax balance, and the tax lien buyer
steps into the shoes of the municipality, so to speak, and holds
the right to receive reimbursement for the amount paid to the
municipality. If the property owner does not make prompt payment to
the holder of the debt, the holder of the debt may charge interest
on the unpaid account, bears all costs of recording the tax deed or
assignment of tax lien, and bears the cost of filing a complaint to
foreclose the lien in the Land Court and providing notice to the
taxpayer of the foreclosure action. Regardless of whether in is the
municipality or the tax lien purchaser who collects delinquent
taxes, the amount that can be collected does not change. All of the
municipal amici stressed that private parties who acquire
tax receivables are bound by G.L. c. 60 just as municipalities are,
and may not impose interest or charges greater than could a city or
HARD TIMES, HARD DECISIONS
Lawrence, Worcester and the MCTA
each stated that reductions in
state aid to municipalities force communities to sell tax
receivables when their budgets are not sufficient to pay for
traditional tax collection. Lawrence offered that, because the Land
Court filing fee for a tax lien case and providing notice is now
$580, it would cost the city of Lawrence $174,000 to file 300 tax
lien cases. This expense is one that Lawrence cannot afford, given
that it has reduced its municipal staff and needs an immediate
infusion of capital to avoid receivership. Lawrence Brief at
Worcester offered a more detailed example, stating that: "[i]n
the prior three fiscal years Worcester has received a total of
$9,796,306, an average of $3,265,435 from the sale of tax
collector's deed sale or assignments under § 52. This amounts to
1.57 percent of the tax levy in FY10, to 1.49 percent in FY11; and
to 1.42 percent in FY12. These average amounts represent between 62
percent and 57 percent of the allowable increase in the tax levy
under Proposition 2 ½, G.L. c. 59, § 21C, in each of the applicable
fiscal years. In more concrete terms, this is the equivalent of 133
percent of Worcester's snowplow budget in FY10 or fifty police
officers in FY-11 or fifty two teachers in FY-12."
"In addition, each tax collector's deed that Worcester sells
represents a cash outlay that it avoids. In order to be valid the
deed must be recorded within sixty days after the tax sale. G.L.c.
60, § 45. The current cost to record the deed is $125, so Worcester
was able to avoid absorbing this cost when the deed purchaser paid
for the recording the prior three fiscal years this avoided cost
was $81,579. Moreover, Worcester is able to avoid absorbing the
$580 immediate outlay of paying the deposit with the Land Court for
each foreclosure complaint filed, and that recording the Notice of
Filing the Complaint. Over the three fiscal years being used as
examples, this avoided cost amounts to $379,320. Although these
casts are ultimately recoverable upon redemption of the tax title,
the immediate cost of these expenditures can strain that portion of
the municipal budget devoted to Worcester's treasury operations … "
Worcester Brief at 3.
Tallage, Lawrence, Worcester, Hopkinton and the MCTA emphasized
that sales of tax receivables are both authorized by law and vital
to the fiscal health of cities and towns because "collection of
property tax [is] the principal source of revenue controlled by
municipalities." MCTA Brief at 2.
ARE THE SAFEGUARDS IN THE TAX COLLECTION PROCESS
Responding to Long's concerns that there might be a tax
foreclosure crisis in the making, or that third parties might reap
windfall profits from purchasing and foreclosing municipal tax
liens, each of the amici addressed the adequacy of
constitutional safeguards in the tax foreclosure process. NCLC,
Lawrence and Tallage, best represent the different perspectives on
the tax foreclosure process.
NCLC suggested that Massachusetts tax foreclosure might be
subject to constitutional challenge, citing Pontes v.
Cunha, 310 F. Supp. 2d. 447, (D.R.I. 2004), asserting that
while the method of notice may be constitutionally
sufficient, the content of Massachusetts notices may be
constitutionally inadequate in that they lack plain language
statements of the homeowner's right of redemption or the
consequences of non-response. NCLC Brief at 2.
By contrast, and perhaps more on point, Tallage emphasized that
Massachusetts law satisfies the constitutional requirements set
forth in Nelson v. City of New York, 352 U.S. 103 (1956)
and Jones v. Flowers 547 U.S. 220 (2006) in that G.L. c.
60 provides for:
- Payment Agreements, as provided in G.L. c. 60, § 62A;
- Tax deferral and amnesty under G.L. c. 59, § 5, cls.41(a) or
18(a), as affected by St. 2010, c. 188, §68;
- Demand under G.L. c. 60, §§ 16, 39 and Notice to Mortgagees
under G.L. c. 60, §§ 38;
- Notice by publication, posting, and recording notices of G.L.
c. 60, §§ 43-45 tax sales, G.L. c. 60, § 52 tax assignments, and
G.L. c. 60, § 53 tax takings as required by G.L. c. 60, § 42, and
recording assignments and takings in the Registry of Deeds or
Registry District of the Land Court as required by G.L. c. 60, §
- Opportunity to be heard by the Land Court; and
- Right of redemption G.L.c. 60, § 65.
NCLC's recommended safeguards speak to "enhanced" foreclosure
notice and service of process. Specifically, NCLC recommends that
an "Enhanced Notice of Tax Title Sale" be sent by the municipality
that sells the right to collect taxes to a third party buyer or
assignee. The enhanced notice would be written in plain language,
would identify the purchaser of the tax receivable, would explain
that the purchaser of the tax receivable may foreclose on the
taxpayer's property, and would emphasize what occurs in the
foreclosure process and how foreclosure would affect the taxpayer's
redemptions rights. NCLC Brief at 2-3.
The NCLC's proposed "Enhanced Foreclosure Notice and Flexible
Redemption Terms" would require personal service upon the taxpayer
and would require that information on how to avoid foreclosure --
including allowing redemption through sale, mortgage finance, or
reverse mortgage transactions -- be included. Should a taxpayer
fail to appear at a hearing on the foreclosure petition, the Land
Court would not enter a default under G.L.c. 60, §67, but would
require the holder of the tax debt to notify social service or
housing agencies such as the Councils on Aging or Massachusetts
Executive Office of Elder Affairs of the pending foreclosure. NCLC
did not address the method to be used where a delinquent taxpayer
is not a resident homeowner, or the extent to which sale or
refinance might be possible for, or desired by, taxpayers who are
unwilling or unable pay overdue taxes. NCLC Brief at 7.
As if responding to the NCLC, the city of Lawrence dispelled the
notion that tax foreclosure is a speedy process and described why
the suggestion that municipalities fail to provide taxpayers with
sufficient notice of the consequences of non-payment of taxes
strains credulity in light of the number of notices that taxpayers
receive before a tax lien is finally foreclosed:
"Taxpayers get quarterly tax bills, a demand notice, a newspaper
publication of assignment, posting of notices in public venues, a
notice of assignment from the assignee when the lien is assigned,
an Order of Notice filed in the Registry of Deeds, certified mail
from the Land Court or deputy sheriff. If a lien is one year old
when assigned, and it takes 6 months to bid it out and assign it,
plus another year to foreclose it, it must be at least 30 months or
10 quarters before a Judgment is issued. If two years old before
assignment, the tax payer has received 14 quarterly tax bills plus
the notices mentioned above - bringing the paper trail to
approximately 20 documents in total." Lawrence Brief at 3.
Lawrence also refuted the argument that tax foreclosure results
in unnecessary loss of equity in real estate, pointing out that 70
percent of the housing stock in Lawrence is investment property
that is owned by absentee taxpayers, and that failing to pay taxes
and deferring maintenance are ways in which property owners can use
real estate as a "cash cow" to be "milked" to the end of its useful
life. In Lawrence, many homeowners who obtained mortgages far in
excess of the value of the home during the past several years may
lack either incentive or ability to pay even the smallest of tax
bills." Lawrence Brief at 1-2. Holding owners to account, literally
and figuratively, is one of the few tools that Lawrence has to
prevent the deterioration of the housing stock in the city.
Lawrence makes the point that any debt is manageable in the
early stages of delinquency, but if a delinquency is allowed to
linger-even in the name of compassion-the debt can become
untenable, and the incentive to bring the account current is lost.
Lawrence also agrees with Tallage that few tax takings result in
foreclosure, and that most end in redemption.
THE SCOPE OF EQUITABLE POWERS
Perhaps the questions of law that have more resonance for
municipalities than the constitutional issues, i.e. sufficiency of
notice and the opportunity to heard and exercise rights of
redemption, are those concerning the scope of the Land Court's
equitable powers. Does the court have inherent or conferred powers
under G.L. c. 60, §75; G.L. c. 220, § 2; G.L. c. 185, § 25, 25A, to
appoint guardians, receivers or representatives to take action on
behalf of absent heirs? Does the court have the court have the
power to appoint commissioners to sell properties and to preserve
"surplus" for the taxpayer and other creditors pursuant to G.L. c.
241, §§ 9, 22, 31, 34, 35?
The absence of case law concerning the scope of the court's
powers has led Long to believe that the issue has rarely been
explored in the context of tax foreclosure cases because actions to
foreclose a taxpayer's right of redemption have generally been
brought and pursued by the municipalities themselves, following
legislative procedures set forth in G.L. c. 60 and G.L. c. 58. The
inference is that, because homeowners may be treated unfairly when
a private party holds municipal receivables, the court can and
should exercise its equitable powers to protect vulnerable
homeowners. However, the counterargument is that decisional
authority on the role of the court in tax collection matters does
not exist because there is no need for an equitable remedy where no
equitable injury exists.
NCLC asserted that the court's powers under G.L. c. 60, § 68 go
beyond setting terms for repayment plans the powers to appoint a
commissioner to sell property and to order redemption costs to be
paid by the commissioner at the times of sale, with any surplus to
be distributed to the owner and secured creditors in the same
manner as would occur after a mortgage foreclosure or partition
action. NCLC Brief at 7.
The amici representing the municipal point of view
emphasized that municipalities can and do exercise discretion to
enter into payment agreements and deferral agreements with
taxpayers who seek such assistance, and that G.L. c. 60, § 62A
allows municipalities to reduce the interest owed on an outstanding
tax obligation. In addition, cities and towns may apply to the
Commissioner of the Department of Revenue for a reduction in the
principal owed in some cases. G.L. c. 58, § 8. The role of the Land
Court, therefore, is essentially a collaborative one in which the
taxing authority and the Land Court may "determine whether the
party seeking to redeem can meet the financial burdens imposed by
statute, and if he can, on what terms payment to the town should be
made." Lynnfield v. Owners Unknown, 397 Mass. 470, 475
(1974). The Land Court may "make a finding allowing the [taxpayer]
to redeem, within a time fixed by the court" and "impose such other
terms as justice and the circumstances warrant." G.L. c. 60, §
THE LEGAL FOUNDATION OF TAX COLLECTION
It is Haley's brief that offers the necessary insight that tax
collection is primarily a matter of municipal finance law and
established statute, referring to Kelly v. City of Boston,
348 Mass. 385 (1964) and citing to a Department of Revenue letter
(2009-1532) stating that "All proceeds from the redemption of tax
titles or from the sale of tax possessions properties of tax
foreclosure must be used in the calculations of a community's free
cash under G.L. c. 59, § 23, with the exception of certain surplus
proceeds received from land of low value foreclosure sales." Haley
Brief at 3.
Long has referred this case to the Appeals Court for review
pursuant to Mass.R.Civ.P. 64 before he renders judgment in the
instant cases. The amici have presented facts and examples
to show that Massachusetts tax foreclosure, whether prosecuted by
municipalities or private parties, is constitutionally sound and
does not put delinquent taxpayers at a disadvantage. Regardless of
the outcome, this case is and will be a source of discussion and
examination, particularly as municipalities struggle to balance the
needs of individual taxpayers and responsibility to protect the
is title counsel in CATIC's Eastern Massachusetts office in
Westborough, Mass. Prior to joining CATIC, she was in private
practice concentrating in real estate conveyancing, commercial
leasing and municipal law. She presents educational programs for
lenders and real estate brokers throughout Massachusetts. Zuretti
received her B.A. from Bates College and her J.D. from Northeastern