Tax Repository Purchase & Tax Assessment Appeal (PA)

28 Replies

In Pennsylvania when a property doesn't sell at the Judicial Tax Sale (Free & Clear Sale), it goes on a list (Repository List) where it can be purchases anytime for a nominal price. When the sale is complete, the tax assessment by law should be changed to be the purchase price until the next reassessment or until improvements have been made triggering a reassessment of that property.

In some areas, they don't automatically change the assessment even though its required by law. They force the buyer to go through the tax appeal process and that usually causes the buyer to pay at least 1 years worth of taxes at the full rate before getting them substantially reduced.

Further, I suspect they purposefully delay completing these types of sales until after the deadline to apply for a tax assessment appeal.

My question is once I have made the bid and they have cashed the check for my offer, do I have "equitable title" and does that give me standing to appeal the assessment even before the sale closes and I have title to the property? The taxing bodies each have to approve the offer, which taxes time, but they are only legally allowed to say no to the offer if I owe delinquent taxes or have had my landlording license revoked in that municipality. Neither of those things is true, so the should not be able to deny me.

They may have accepted your check but until the title is in your name i wouldn't start any process, just in case someone contests the sale, i believe there is a timeline allowed for someone to contest a sale ?

The owner is deceased. His estate has already let the property next door be sold through a repository sale for unpaid taxes. I do not think there is a process for anyone to redeem the taxes on the property at this point, nor do I think it is at all likely to happen even if there is a way to do that.

Also, the cost to file an appeal is only $25, so the cost is insignificant.

My question is more about whether I have legal standing to file an appeal. The county government here isn't following the law with regard to repository properties and their assessed values. I'm thinking this could be a way of addressing the issue without taking them to court.

Kevin,

First off, in Pennsylvania what you pay for a property has nothing to do with the assessed value.

You have to look at the assessed value x the common ratio to get the actual value, or what the county thinks it’s worth for tax purposes.

Then decide whether it is accurate or not. If not, then go ahead and file an appeal. Keep in mind you will have to prove your case. The best way using comps and an appraisal.

@Alan G. , you are correct in general, but incorrect in this case.

Tax repository sales are a special exception. When you buy from the tax repository the assessed value is supposed to be reduced to the purchase price. It is black letter law.

I have purchased from the repository and been through the process before. I even called the assessor before buying and they said "Yes, we are supposed to reduce to the purchase price, but we don't. You'll have to appeal to get it reduced". I did and got it reduced on those properties but had to pay full taxes in the meantime.

If you want to read about it, here is the pertinent law. It is in section 628.

PA Tax Sale Law

Well this is an interesting topic, and I have to admit I learned about the change in assessment that should occur after a Tax Claim Bureau repository list purchase.

I would say you have little to lose by filing an appeal whether you have the required standing; you lose the filing fee, some time, and if you are really unlucky they can raise the assessed value (can't imagine that really happening in this particular case, but it is always a possible outcome of an assessment appeal).

But until the deed is recorded, you don't have full ownership rights; which rights you do have prior to recording can be determined by the courts when the statute is not entirely clear. How much would that lawsuit cost vs the one year's worth of inflated taxes becomes your metric of sorts to see if it is worth the battle; my guess is it isn't.

Mentioning @David Krulac and @Chris K. to see if they have anything to add.

@Kevin Sobilo

Interesting question. I literally haven't researched this at all but here's my educated guess:

  • I forget what the exact language is but the relevant laws state that the "owner" of real estate can appeal the assessment. PA Courts have historically read that word "owner" to cover not only the record owner but other folks as well (e.g. tenant, subtenant, etc.). I recall seeing some old caselaw saying that purchasers with equitable title may appeal. Based on that, I would say you probably have standing to appeal. 
  • I would also guess, however, that there are no appellate cases directly on point since I can't see how someone would want to spend money fighting this issue. Most properties that end up the repository sale typically have a low assessed value to begin with. Fighting this issue could potentially cost five figure in legal fees. Thus it most likely doesn't make sense as a business decision.
  • That said, I suppose I could see it carrying more weight if you could get multiple purchasers and file a suit together as a class-action or quasi-class-action suit. But you would probably need a pretty big class of plaintiffs to make the suit worth it. My guess is that the damages for each plaintiff are minimal in most cases. 

Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information.

@Chris K. , thank you for the input!

The issue of standing is my main concern if I choose to try appealing before my purchase closes. The appeal board really doesn't have any discretion on what to value the property at once the appeal is heard. The valuation is black letter law to be set at the purchase price. However, the appeal board has a minimum $1,000 valuation rule. So, that is where it will end up.

The current assessment is $41,300, so reducing it to $1,000 is a 96.85% savings. Even on a modest property tax amount its worthwhile to pursue.

I have considered the class action route as well because there are many buyers who have been disadvantaged over the years by the county intentionally not following this law. I would rather not be the face of the next big county government scandal, even though I'm one of the aggrieved not the one responsible for causing the issue.

@Kevin Sobilo

What county is this in? If you don't feel comfortable posting here, just PM me. 

Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information.

@Kevin Sobilo

Ha --- didn't realize that all of this was going on. I guess I should pay more attention to local news. :)

But the article does a good job of showing the economic challenge in fighting this. From an economic standpoint, no lawyer will take this case on a contingency basis because the damages are too low. Likewise, the pool of money at dispute doesn't justify any kind of action at the Commonwealth Court level. And class-action is out of the question from an economic standpoint unless there are other counties in Pennsylvania with similar policies. 

Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information.

@Chris K.

The aggrieved purchases would go back 10 years to the last assessment. Purchases made 10 years ago and held (many never file appeals because they don't know to do so), could be owed 10 years of taxes potentially. Additionally, a court could find the county guilty of spot reassessments. This could trigger additional penalties and interest.

I would guess the potential liability for the county could run a couple million dollars at least. Certainly not a King's ransom but not chump change either.

@Kevin Sobilo

I suppose someone could make an RTK request to see how many properties they sold over the years. But I would be surprised if it is the potential damages are that high for a few reasons. 

  • Repository properties don't get sold that often. There are many properties on the list that ended up there in my first year of law school. This is essentially why Luzerne County is trying to dump them. 
  • Luzerne County may reassess the property after a triggering event --- whether it's a sale, rehab, or something else. Presumably, people who buys these properties at a repository sale are not just sitting on them for no reason. So I doubt there are many cases where the damages would last for 10 years.
  • I personally don't see a claim for spot reassessment claim. It's also an incredibly time-consuming claim to bring. Hence most spot reassessment litigation involves large commercial properties --- typically properties that don't end up at a repository sale. 

Realistically, I think the only way this gets litigated is via a class action lawsuit. But even at a few million dollars, I can't see too many lawyers wanting to jump on this one --- maybe if someone could make a bring a suit against multiple counties.

Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information.

Originally posted by @Kevin Sobilo :

@Chris K. , It's in Luzerne County. I live up in Lackawanna County, but have been investing down in Luzerne County.

Here is an article about the issue:

Repository Assessments Questioned

Since the statute is explicit, if it goes before a judge the ruling has to favor the tax sale purchaser; it's not like it will go before a magistrate where it's anybody's guess. The fools running that county assessor department don't seem to grasp that for fact; and even their solicitor thinks they are ok doing that?!?! They will get their chance to reassess soon enough, once rehab / renovation / revitalization occurs.

@Steve Babiak , yes and no.

If I buy a house off the repository list and rehab it, it will not be reassessed. That would be considered "spot reassessment" because they don't reassess other houses that get rehabbed in a similar way.

They can reassess by law if there is more than $2500 in improvements in a given year, if I recall correctly. However, reassessment must be done consistently. So, if they aren't doing reassessments when other properties pull permits for $5-15k in renovations, they cannot treat a repository property differently.

I'm not sure what threshold they use to decide if they need to reassess. It might be a higher dollar amount like $25k or maybe they are only doing it when there is a change in square footage, but they aren't doing it here for every rehab.

@Kevin Sobilo

In my book Chapter 63 deals with Repository Sale.  @Steve Babiak , I know you have my book, look up that chapter 63 and I got the house assessment reduced to exactly $8.58 total real estate taxes for a year, and this assessment will stay the same as long as:

1.  There is no county wide reassessment

2.  There is no major rehab, addition, or other work that would require a building permit.

3.  The property is sold.

Also in my book Chapter 111 is about 8 other properties that I bought from the Repository.  As I relate in that Chapter, I found out about this source of properties because a group of investors from NYC bought 500 of these in one day for $50 each.

@Kevin Sobilo , @Chris K. , and @Steve Babiak  

I appealed an assessment, before having the deed, but did have a ratified agreement to purchase with consideration.  I am not an attorney, but I considered that to be that I was an "Equity owner" though not the "Record Owner".  There was no question about the legitimacy of filing.  And by the time you have your hearing which can be months away, you will be the record owner.

Where I'm at, every time I pull a permit I get reassessed. I presume they do that for all permits in those counties.

So I figured that those counties discussed above in this thread that are looking for money would reassess when they get that chance, but if they aren't doing it with each permit that could partly explain why they have that need for money - they aren't picking up what should be low hanging fruit got them.

@Steve Babiak and @Kevin Sobilo

In every county in PA that I'm familiar with, when you pull a building permit, a copy goes to the county assessment office.

However, there are at least 2 variables in that process:

1.  In some counties the assessment office selectively act on the building permit.  Maybe low dollar value permits are ignored?  Maybe permits for roof replacement, or furnace replacement are ignored, you started with a roof and end up with a roof, and unless its some high dollar value roof, they only have a certain value.

2.  The municipalities decide what they are going to require building permits for.  That's the municipalities, cities, Boroughs and Townships that decide what requires a building permit, not the assessment office.  We did a big remodel job on a house two doors from the city hall.  We replaced 37 windows.  We ripped off all the old siding, insulated the walls, Tyveked the whole building, added all new siding, added two furnaces and two hot water heaters and added FOUR new bedrooms.  I told the contractor that they had to go to city hall and find out what parts, or if all the remodeling required building permits.  After talking to the zoning officer they were told that NO permit was required "since we were not changing the footprint of the building."  You may ask how do you add 4 bedrooms and not change the footprint of the building?  The 4 bedrooms were added in the unfinished attic without raising the roof, or adding any new dormers or gables.  Therefor no building permit, no reassessment!

@David Krulac , your example in #2 would never happen in my area. They require permits for anything they should require permits for. They have to because the permit fees are used to pay for the code enforcement department and every municipality wants to collect enough to cover that department (and more!)

Are you 100% sure the contractor was honest with you? Many don't want to deal with permits if they don't have to, especially if the permit fee comes out of their end of the contract. 

I do agree with #1, I think there is a threshold for value they must be using. Either that or they are just ignoring permits that sound like repairs rather than improvements. I think the distinction between repair and improvement is probably hard to discern from a permit especially when most permits are not very detailed in describing the work being done. 

@Kevin Sobilo   I'm 100% certain because I verified.

Around here window replacements typically don't require a building permit for example.  Typically roof and furnace replacements don't require a building permit.  In that same town, we did another project where we replaced all the windows, all the siding, all the drywall, the kitchen and the bath and no permit was required. I went myself to verify and make sure that nothing had changed in their policies.

In another town, we had a furnace replace, while the company was there and we were not there the code enforcement officer unannounced and uninvited and without permission went into the house and confronted the firnace isntallation company.  He shut them down and told them that they needed a permit.  I think they had two trucks there with their company name, logo, etc plastered all over the trucks, so it was obvious they were doing work there.  It was one of the largest companies in the area in business over 100 years. They told the CEO, that they had done 200 furnaces in that town and never had gotten a permit, he told them that they were wrong 200 times!  They got a permit to resume work.

In my earlier post, when I wrote "reassessed", what I was implying is that the tax assessor office looked at the permit and determined whether it necessitated a change in value; roof replacement, window replacement, siding replacement - those typically don't change the assessed value. Adding central air always changes the assessed value. I have added full and half baths without changing building footprint, and those changed assessed value. If the house is a rental house, the new assessed value hits ASAP; for flip houses, they usually wait to change assessed value until the new owner comes along.

I can certainly agree that each municipality has their own threshold for when a permit is mandatory; I have had projects where a number of permits were pulled, then something new popped up that would typically need a permit, and yet code official would say you have already paid enough permit fees there so no need for another permit. So you never know until you ask.