JOINT FAVORABLE REPORT
AN ACT CONCERNING THE ASSIGNMENT OF LIENS FILED BY A MUNICIPAL TAX COLLECTOR AND A STUDY OF THE MUNICIPAL TAX LIEN FORECLOSURE PROCESS BY THE CONNECTICUT LAW REVISION COMMISSION.
Joint Favorable Substitute
SPONSORS OF BILL:
REASONS FOR BILL:
The bill was drafted to address the concern that debt buyers were taking advantage of homeowners by threatening them with foreclosure for relatively small liens. The bill would increase protections to property owners from foreclosure by third party lenders through limiting the assignment of liens on unpaid taxes in excess of $2,500 and requiring a notice of sale so taxpayers would know that they were dealing with a third party lender.
The substitute adds language which lists the information required in a notice to a taxpayer against whom a lien has been filed.
RESPONSE FROM ADMINISTRATION/AGENCY:
NATURE AND SOURCES OF SUPPORT:
Connecticut Fair Housing Center, Jeff Gentes: Supports this bill. Too often homeowners face foreclosure from sketchy debt buyers who are earning 18% interest on their secured “super lien.” The Center would much prefer a system that encourages liens to stay with the municipalities, encourages repayment plans, reduces the interest rate charged to homeowners, and increases transparency. The bill would require a notice of a sale; taxpayers would know when they had to deal with a third party lender. It would also help ensure that small liens stayed within towns. At least four municipalities now market their sewer lines to the debt buyer market, which puts constituents at the mercy of shadowy, poorly regulated investors. Requiring that liens be at least $2,500 would limit assignments to true property taxes.
NATURE AND SOURCES OF OPPOSITION:
Connecticut Tax Collectors' Association, William L. Donlin, Legislative Co-Chair: Is opposed to this bill. The bill would limit the assignment of liens on unpaid taxes in excess of $2,500. In general, municipalities that assign tax liens, the balances that are due reflect multiple years of taxes, and are generally over $2,500. However, there are many liens that generate a delinquency of less than $2,500 such as sewer liens and liens on property that has a relatively low assessed value. Tying the hands of the tax collector by not allowing these accounts to be assigned due to the low dollar amount encourages the taxpayers to be delinquent because they know the municipality cannot assign their lien. Restricting the municipality's ability to assign a lien based on the amount of the lien can have an unintended negative impact on the municipality's lien sale.
Connecticut Tax Collector's Association, David Kluczwski, Legislative Co-Chair: Is opposed to this bill. Restricting the municipality's ability to assign a lien based on the dollar amount goes against the uniform statutory procedures we follow. It would be unfair and unjust to assign the lien for one property that is three years delinquent but not another property delinquent for three years simply because the dollar amount is below $2,500. Additionally, many liens issued by a municipality are for real property assessed at a relatively low value which would take upwards of five years to reach a dollar threshold of $2,500. By not allowing these accounts to be assigned, this bill would lead to inefficiency and an increase in uncollectable amounts.
The Marcus Law Firm, Walter M Spader, Jr: Is opposed to this bill. The bill, as drafted, prohibits the assignment of any lien under $2,500. To restrict the municipality's ability to assign a lien based on the amount of the lien can have an unintended negative impact on the municipality's lien sale. For example, in Bridgeport many properties have two parcels, any assignee of a lien is not going to purchase a lien on a condo if the city can't also assign them the lien on the parking space, which may be a separate $100 lien. Side lots should not be disassembled from main lots, just as parking spaces should not be disassembled from the main building just because the amount of taxes is under $2,500. In other municipalities that assign sewer liens with their tax liens, the sewer lien that complements a $7,000 tax lien may only be $400. If the taxing authority is restricted from assigning their sewer lien along with their tax lien because of its amount, they would be putting enforceability and collectability of the sewer lien in jeopardy. This bill would not reduce foreclosures; it would actually force municipalities to be more aggressive with their in-house collection activity.
Propel Financial Services, Mary Belan Doggett, Vice President and General Counsel: Is opposed to this bill. While the purpose of this bill is well intended, the practical effect of the legislation would be devastating to many property owners, taxpayers, city governments, and the tax lien investing community. When a property tax lien is assigned to a third party, this allows the property owner to negotiate a flexible payment plan for a longer term than the government is typically able to offer. Propel's business model is geared towards avoiding foreclosure for the properties on which it holds a lien. As a result, the foreclosure rate on tax liens assigned to third parties, like Propel, is less than one-half of 1%. Placing an arbitrary $2,500, threshold on offering tax lien sales will only hurt the taxpayers that need the most help. Propel's experience has shown the most appropriate threshold is one adopted by the local taxing authority who have the most knowledge of the specific needs within their community. A large percentage of tax liens sold by cities are less than $2,500, this legislation would truly hamper the assignment of property tax liens in a way that would harm may stakeholders.
Connecticut Conference of Municipalities, Jeff Bridges: Is opposed to this bill. This bill would make lien assessments significantly less attractive for investors, hurt municipalities that use the process, and do very little to benefit taxpayers in the process. In general, the assignment of liens are not made to initiate foreclosure sales, but rather as an opportunity for the third party to offer a longer payment plan terms with the taxpayer that the municipality is unable to provide. Therefore, the bill would not reduce foreclosures. This bill provides no increased consumer protections for homeowners facing foreclosure; rather it shifts responsibility and forces enforcement collection and proceedings onto municipalities and local budgets. A better approach would be to maintain state aid to towns and permit local revenue diversification.
Reported by: Jonathan A. Krumeich