Mayor Acts Fast, Calls For Moratorium on Predatory Tax Lien Sale System

by Shilpi Paul

Mayor Acts Fast, Calls For Moratorium on Predatory Tax Lien Sale System: Figure 1
Courtesy of the Washington Post.

After reading a recent Washington Post exposé that revealed a predatory tax lien sale system that resulted in homeowners losing their houses over minor tax debts, Mayor Gray called for an immediate moratorium on the practice, reported Housing Complex Monday morning.

As outlined in the Post, when homeowners fail to pay property taxes, the District’s Office of Tax and Revenue will place a lien on the property. Then, once a year, they hold an auction and sell the liens to investors who then charge interest and legal fees on the debts. Debts originally as small as $134 can quickly balloon to thousands, and if the homeowner is unable to pay, their home goes into foreclosure.

Since 2005, 200 houses have been foreclosed on, and apparently 1,200 more are at immediate risk. The victims are often elderly and living in poor neighborhoods, and many owned their homes outright.

Mayor Gray was reportedly “shocked and outraged” by the findings. From Gray spokesman Pedro Ribeiro:

“[The mayor] is calling for an immediate moratorium on OCFO’s sales of liens and foreclosures, and will transmit emergency legislation addressing the situation to the Council for them to consider when they come back from recess. The legislation will put in place needed protections for homeowners – and particularly seniors, who appear to have been the group most frequently affected by this practice.”

Mayor Gray acted quickly; the article was published in Sunday’s paper. A follow-up story, which casts a shadow of suspicion on the District and the six firms who won many of the liens, was published today. Tomorrow, the third article in the series will dig into mistakes made by the District in declaring property owners delinquent even after they paid their tax debts.

See other articles related to: washington post, vincent gray

This article originally published at https://dc.urbanturf.com/articles/blog/mayor_gray_acts_fast_calls_for_moratorium_on_predatory_tax_lien_sale_system/7531


  1. zcf said at 5:10 pm on Monday September 9, 2013:
    that's insane. I hate this city more and more. and good first step Mr Mayor - but what do you plan to do with all the others whose lives have been destroyed?
  1. zcf said at 5:14 pm on Monday September 9, 2013:
    p.s. I'm not so shocked either. When I moved into my condo. I found out that DC WASA put a tax lien on our building because our shitty/fraudulent developer hadn't bothered paying his water bills for god knows how long. I and the other owners in the condo scrambled to pay off a $900 bill that wasn't even ours because we figured a tax lien must be super bad. DC gov didn't care. And I'm glad we did what we did. Lesson learned. Before you buy a place - make sure all utility bills are paid off.
  1. mona said at 7:03 pm on Monday September 9, 2013:
    I thought the whole point of tax sales were to get the city the money it was due from taxes. Now the article shows some very shady people involved in the business of tax sales but does that mean that all tax sales are bad? The mayor just stopped all tax sales but what about developers and absentee landlords or slumlords or just people who decide they don't want to pay the city taxes? They all now get a free pass. As for lives being destroyed...I get that but the city give people a huge number of chances before they actually let the tax sale go forward. One thing the WP article failed to mention is the process that you have to go through and how very lenient the city is for giving people a chance to catch up. This process can take years before the sale actually goes through. It doesn't happen over night. The reality is there are people with very special circumstances who need to be given extra consideration and then there are some who just decide it isn't their problem and don't want to deal with it and don't want to pay taxes
  1. Zesty said at 8:08 pm on Monday September 9, 2013:
    @Mona, Yes, the system is broken. What you fail to mention is that someone could have a $200k home w/o a mortgage. They could not pay a $1,000 tax bill and not only be forced to sell their house to pay for the $1,000 but lose the whole $200k equity in the process. This destroys communities and serves to further add to blight that everyone frowns upon. How in the world is this a good system? DC Gov is not ARES or Carlyle; there is a human component to policy decisions. What you miss is that this is not just about people with special circumstances; the whole process is broken!
  1. Zesty said at 8:14 pm on Monday September 9, 2013:
    ...That same person who just got kicked out of their home is now staying at a shelter, partly funded by the city; they are now eligible for food, healthcare and other assistance that is provided by the city. So that $1,000 bill the city wanted to collect may lead to thousands in services they are now providing to someone who didn't need it before. Even worse, such an event could lead to the loss of one's job and the loss of income tax revenue as well. Municipalities should look at the totality of their policy decisions; unfortunately, it looks like Gandhi was trying to make a quick buck so the books would look good (allowing investors to reap huge profits).
  1. Sean said at 8:35 pm on Monday September 9, 2013:
    What a shock. Another horror story out of the DC tax office. Maybe the city should set up a program to help certain homeowners (like the ones featured in the WP series) put their tax balances on suspense until the property is sold. It's not like the city is getting a huge amount of revenue from these very low income homeowners. This is the same tax office that managed to let someone steal $40-50 MILLION a few years ago. Someone should be watching out for the most vulnerable homeowners rather than facilitating what amounts to a big game of "Steal this House."
  1. Maverick said at 2:49 pm on Wednesday September 11, 2013:
    I agree with Mona. I work with homeowners who have property in tax sale. The reality is that by the time a property comes to sale, people have failed to pay taxes for two years. Am I saying that every transaction runs perfectly - no. But as stated, the Court is very sympathetic and provides ample opportunity for a person to redeem their property. The foreclosure process takes NO LESS THAN one year - usually three. That is enough time for a person who wants their property to engage the system to save it. Remember, also, taxes are what pays for public services.
  1. Zesty said at 3:51 pm on Wednesday September 11, 2013:
    @Maverick, Firstly, a $500 tax bill doesn't pay for any "public services"; the indirect G&A(General & Administrative) costs associated with processing such a bill will exceed $500 (you won't even cover the costs associated with getting your money back). This is like spending $1,000 on a lawyer to sue someone for $500 (you're in the negative, so there's no money left over to pay for "services"). Below a certain threshold, it's not about the money but it's about enforcing laws on the books. But the fact that a $200 bill can be tacked on with thousands of dollars in mindless fees (by the "investor") and make the sum beyond repayment for people who are poor illustrates a broken system (there are poor people in DC). I agree that there should be consequences for not paying your fair share but the process is broken. Maryland reformed their system and DC should do the same; I think some people here are out of touch.

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