Tax Collections, Lien Transfers, & Foreclosures
March 29, 2003
Many self serving articles about Georgia tax laws have been
published with the intent of misleading and scaring the public. Taxes are
necessary for Governments to provide services such as: police and fire
protection, roads, education, and social services.
Fulton County, the largest County
in Georgia, billed $1.2 Billion in property taxes in 2003, representing 27% of
all property taxes collected in the State. Property taxes contribute 80% of the
revenue in the Fulton County budget. Already, the Tax Commissioner’s Office has
collected 99% of taxes billed in July 2003. If you ever wondered why Fulton
County does not suffer the same degree of fiscal woes as the State and other
municipalities, locally and nationally, one of the primary reasons is the 99%
plus collection rate the Tax Commissioner has achieved for the County, the City
of Atlanta, Fulton County Board of Education, and the Atlanta School Board since
1999. Since 1997, revenue collections have far exceeded anticipated revenue,
resulting in budget surpluses, fully funded reserves, and the highest bond
ratings.
Taxes are billed July 1st
every year, with due dates of August 15th and October 15th
for the City of Atlanta and Fulton County respectively. Taxes become delinquent
after those dates and by law interest accrues at 1% a month on the unpaid
balance. A one-time penalty of 10% is assessed on the unpaid balance after 90
days.
Georgia law requires liens or fi fas be attached to delinquent
property taxes and recorded in the Office of the Clerk of the Superior Court.
Before liens are placed on properties the law requires the Tax Commissioner
give property owners a “30 day notice of
intent to fi fa” by mail. This “thirty day letter” must be in writing, must
notify the property owner the taxes are unpaid, and unless paid, a lien shall be issued unto the property and
filed with the Clerk of Superior Court. The primary purpose of the lien is to
notify the world at large of the defective property title. Secondarily, the
lien protects Governments’ right to collect delinquent taxes.
Under Georgia law, anyone can
purchase liens from the tax office by making a demand on the Tax Commissioner.
Tax Commissioners have no discretion in the matter. Refusal to transfer liens
on demand will result in a Tax Commissioner being held in contempt of court.
Since the mid 1800s Georgia law has allowed the transfer of property tax liens
and their foreclosure by third parties. Lien transfer and the threat of
foreclosure enable governments all over the United States, Georgia being no
exception, to shift the burden and cost of delinquent tax collection from the
public sector to the private sector. After lien transfer, interest accrues at
the rate of 1% per month on the unpaid balance just as it would have if the
liens were held by the county tax office.
Since 1994, when lien purchasers
were invited to the County by the Board of Commissioners with a bulk lien
purchase contract, only 2 to 3 percent of tax collections have been generated
through lien transfers. In other words, 96% to 97% of taxpayers pay taxes
directly to the tax office without lien transfers.
Legislation introduced by Rep.
Douglas Dean in 2002 struck down the Georgia statute requiring prospective lien
purchasers to give 60 days notice to property owners by certified mail before
liens could be transferred. Since then, no notice is required prior to transfer,
which has hurt property owners.
Lien purchasers do not have property
rights. They cannot trespass on the property; they cannot collect rent; they
cannot evict a tenant or property owner. Lien holders only have the right to
receive payments to satisfy the liens in the same manner as the Tax
Commissioner would have done. If a lien holder pays taxes on a property, the
property owner can consider it a gift.
Once a lien has been transferred,
the Tax Commissioner has no further involvement in the collection process.
Ultimately, when liens are not satisfied the law gives the lien purchaser the
right to have the Sheriff levy and foreclose on the property. The Sheriff
conducts this foreclosure sale on the courthouse steps at 10:00 a.m. on the
first Tuesday of the month. Georgia law requires the Sheriff to give a twenty-day
statutory notice to the owner of record of the property as well as to the recorded owner of each security deed affecting the
property prior to foreclosure. The notice must be by registered or
certified mail to the appropriate parties. The law also stipulates that for tax
liens, written certified notice be sent the defendant ten days prior to sale,
to the “defendant’s last known address as listed in the records of the Tax
Commissioner.”
After sale on the courthouse steps
the successful bidder receives a tax deed from the Sheriff. The purchaser at
the sale has no immediate right of possession and by law the property owner
or any person having the right, title, or interest in or lien upon the property
can redeem it from the tax deed holder. This redemption can occur at any time
within twelve months of the sale or foreclosure, and at any time after the sale
until the right of redemption is barred. The right of redemption can only be
barred one year after the sale. After the right of redemption is barred, the
deed holder has to file a quiet title action in order to gain full control of
the property.
As an illustration of how the
redemption process works, take for example a $200,000 property being foreclosed
for tax lien and Sheriff costs, totaling $5,000. The opening bid would be
$5,000. If the winning bid, for example, is $100,000, then this amount becomes
the cost basis for all redemption calculations. Under existing law “the
redemption price, shall be the amount paid for the property by the purchaser
after the sale for taxes, plus any special assessments on the property, plus a
premium of 20 percent of the amount for each year or fraction of a year which
has elapsed between the date of the sale and the date on which the redemption
payment is made…”. After the first year there is an additional 10% per year
or part thereof. To redeem the property anytime within the first year anyone
having an interest in the property can redeem it for $100,000 plus a premium of
20% of $100,000 - a total of $120,000. The Sheriff would have in her tax
account a surplus or overbid amount of ($100,000 -$5,000) $95,000 for “the person entitled to receive”,
usually the property owner, to use towards the redemption cost of $120,000. The
property owner actually has to come up with $25,000 out of pocket in order to
redeem the property. I have heard of instances where the property owner claimed
the excess funds from the Sheriff and abandoned the property to the tax deed
holder.
The
issue as to what the County should do about tax lien sales is not one that
rests with the Tax Commissioner. It is a policy issue with social, political,
and budgetary implications. Governing authorities will get the revenue required
for governing. Whether one should be overly protective of 3% of taxpayers who
do not pay taxes on time by enacting laws that ultimately require governments
to raise taxing rates thereby punishing 97% of public who dutifully pay taxes
is a policy and budgetary dilemma, not a collection issue.
Return to current article
