Belfast to reconsider process for selling tax-foreclosed properties

By Jordan Bailey | Aug 12, 2014

Belfast — The Belfast City Council rejected all bids for three foreclosed properties and will reconsider the process by which such properties are sold.

At their regular meeting Aug. 5, councilors discussed issues with an ordinance authorizing the council to retain or sell tax-foreclosed property and stipulating that properties being sold must be sold through an auction process.

City Manager Joseph Slocum told the council the city has taken five properties through tax-foreclosure process. Those properties are located at 18 Mill Lane, 94 Swan Lake Avenue, 97 Swan Lake Avenue, 12 Cory Lane, and another is on Lincolnville Avenue. The city received sealed bids on three of those properties. At a previous council meeting, one bid was opened but no action was taken.

At the time, councilors had questioned the fairness of the foreclosure process and of keeping money beyond the tax amount owed rather than giving the surplus money from the sale of the property to the former owner.

By state law, a municipality becomes the owner of a property when tax payments on that property are three years overdue. Slocum said the city communicates extensively with the owners as the three-year deadline approaches and then can delay the auction process in order to give former owners further opportunity to redeem the property.

Attorney Kristin Collins said when the city does acquire money for a foreclosed property, none of it can legally be given to the former owner because doing so would constitute giving public money to a private benefit.

The council had also requested more information on alternative methods for dealing with non-payment of property taxes. Slocum said he spoke with Collins and City Attorney Bill Kelley who did not recommend any other methods.

“If there is going to be a change, it will have to be a legislative one,” said Collins. “I've thought about it a lot because I do see the fairness element of it, but I can't come up with any more creative solutions that will be legal.”

Collins told the council that small towns sometimes sell properties back to former owners through installment contracts similar to lease-purchase agreements. Once the balance of the tax bill is paid, the former owner would get a quitclaim deed for the property. A drawback with this method is that if the former owners were unable to pay the taxes they often are unable to make the installment payments either. The town incurs legal fees foreclosing on the property after a breached agreement, and would then proceed with an auction process. Collins said this method often extends the amount of time the town is not receiving taxes on the property.

Councilor Roger Lee argued that the ordinance should be modified to give the council discretion on how it sells foreclosed properties because the quick bidding process usually yields bids much lower than market value.

“If we have a property with higher value we should have the option to approach it with a different procedure,” Lee said.

Slocum told the council the highest assessed value of the five properties is $71,000. Councilor Mary Mortier added that many properties are assessed at higher than fair market value right now.

Small towns often have a warrant article giving selectmen discretion to sell the properties as they see fit, Collins said, but most of the larger towns have a strict process like Belfast's.

Lee also questioned whether other towns hold on to foreclosed properties for longer periods of time.

Other towns do hold on to their foreclosed properties for a number of reasons including concern about repercussions of getting people off the properties and concern about not having gone through the process right, Collins said.

The problem with retaining these properties is that the city is liable 60 days after taking possession of a property, she said, and because taking possession is a nebulous concept there is a liability risk to the city if someone is hurt on that property.

Councillor Eric Sanders suggested holding on to foreclosed properties for potential future use could save Belfast money in the event that the city has to purchase property for a project, as it has had to in the past.

“Unless we have a use for the people of the city of Belfast I think we have to sell it,” said Mayor Walter Ash. “I think it’s the best for the city to get rid of the property. It could be bad for children to get in there and get hurt.”

The council then discussed the dangers of derelict buildings on the properties.“If we sit on them, nothing will happen,” Councilor Nancy Hamilton said. “We’re not going to use any tax payer money to get them up to code.”

Collins recommended purchasing property insurance and liability insurance for any foreclosed properties the city retains. Removing structures could be expensive as well. Collins said Northport is dealing with a building that will cost $30,000 to demolish.

Councilors raised further questions including whether a minimum bid could be required during the auction process and whether the sale could contain stipulations that the buildings be demolished or brought up to code. The council will discuss those questions at a later date.

The council voted 4-1 to reject all the bids, return them to the bidders, and reconsider the process and sale of tax-foreclosed properties. Mortier voted against the motion.

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