Monthly Archives: July 2019

BBA Adopts Guidelines on Reforming Tax-Lien Foreclosures

Prompted by concerns about existing Massachusetts laws regarding the enforcement of foreclosure on homeowners with outstanding municipal tax arrears, the BBA has joined other advocates, chief among them Greater Boston Legal Services and the National Consumer Law Center, in endorsing reforms to the state law on these “tax-lien foreclosures”.

Under current law, tax-lien foreclosures can lead to outcomes in which a homeowner loses not only their real property but all the equity they have built up—regardless of the amount of debt actually owed. Municipalities can sell the outstanding debt to third parties, who have an incentive to take advantage of that windfall provision but no incentive to consider the effect of foreclosure on the community as a whole. 

Meanwhile, rising property values and property-tax rates often combine to make it difficult for homeowners to stay current on their tax bills—especially for those on low or fixed incomes, including the elderly, the disabled, or anyone who is house-rich and cash-poor. Some seniors may not be aware of the deferrals and abatements available to them by law, while others with cognitive disabilities or surviving spouses may have trouble understanding their obligations in the first place. These problems are frequently compounded by inadequate notice of the possibility of being foreclosed upon. 

Regardless of the cause, once a homeowner falls behind, punishing statutory interest rates of 16% and late fees work to put a potential solution further out of reach. And even when homeowners seek an agreement to pay off their back taxes, they are faced with a statutory minimum initial payment of at least 25% of the debt, with additional requirements imposed by some municipalities. The law actually provides that debtors can potentially face arrest. 

Tenants in housing that has been taken by tax foreclosure find themselves with little recourse—and often little warning, since they may not even be aware of the owners’ non-payment of taxes, the foreclosure that results, or the change in ownership. Their first inkling of a problem may come in the form of an eviction notice. And unlike tenants after a mortgage foreclosure, they have no legal protections after tax foreclosures.  

Private third-party buyers of municipal tax liens can reap a windfall profit by foreclosing, evicting the former owner (or tenant) and re-selling the property. In some instances, the underlying equity to be gained may be great enough that a debt-buyer is willing to pay even more than the value of the debt. And the homeowner loses not only a residence but all of the equity they may have spent decades building. 

All of this can lead to homelessness and financial ruin, one family at a time, with a cascading destabilizing effect on vulnerable communities. The small number of third-party buyers responsible for the bulk of tax-debt purchases have been accused of unscrupulous practices in the course of pushing properties toward foreclosure. 

These issues have caught the attention of some in the news media, most prominently the New England Center for Investigative Reporting, which has produced a series of reports in conjunction with WGBH-FM and with the Boston Globe. The Boston-based National Consumer Law Center has advocated reforms in this area and in 2012 issued a report entitled “The Other Foreclosure Crisis: Property Tax Lien Sales” that recommended, inter alia, reducing the interest rate applied to tax debt, strengthening notice requirements and enhancing the notice provided, and encouraging more use of tax deferral and abatement plans. 

In response, legislation has been filed in Massachusetts by State Representatives John Mahoney and Tram Nguyen, and State Senator Nick Collins—each bill addressing different aspects of the problem, sometimes in overlapping ways. Greater Boston Legal Services has been at the forefront of efforts to enact legislation. 

The BBA’s Real Estate Law Section reviewed the existing bills, with an eye toward pulling out key provisions suitable for potential BBA endorsement and packaging those into a set of guidelines for legislation. The BBA’s Delivery of Legal Services Section voted to endorse these principles as well. No other section offered substantive comments. 

Last week, the BBA Council voted in endorse those guidelines, which read as follows:

The Boston Bar Association is concerned about existing Massachusetts laws regarding the enforcement of foreclosure on homeowners with outstanding tax arrears. Under current law, these “tax-lien foreclosures” can lead to outcomes in which a homeowner loses not only their real property but all of the equity they have built up—regardless of the amount of debt actually owed. Municipalities can sell the outstanding debt to third parties, who have an incentive to take advantage of that windfall provision but no incentive to consider the effect of foreclosure on the community as a whole.

The BBA recognizes that municipalities are entitled to collect all taxes due and believes they should have the tools to work out repayment agreements to help fairly achieve that result. We encourage municipalities to make use of the existing flexibility provided in G.L. c. 62A as part of this process. We remain concerned nevertheless about certain vulnerable homeowners, who may face their own particular challenges in confronting tax arrears—especially given the statutory default interest rate of 16%—and may be especially prone to misunderstanding the penalties and outcomes that may result. Finally, the BBA is concerned that current law does not adequately consider the impact on tenants who live in properties subject to tax-lien foreclosure proceedings. 

Therefore, the BBA concludes that any legislation to reform the way in which tax-lien foreclosures are handled should: 

•    Eliminate the windfall to private purchasers of tax titles upon foreclosure, as well as any incentive to pursue that option in place of a potentially workable repayment agreement. 

•    Allow municipalities to adopt repayment plans with more flexibility in repaying back taxes and allow for greater reduction in accrued interest, especially for low-income and elderly individuals who are house-rich but cash-poor. 

•    Provide for more effective notices of tax deficiencies and foreclosures, including delivery to the local council on aging and more understandable language explaining what steps homeowners can take to address tax arrearages and what the consequences of non-payment may be, including foreclosure and loss of equity. 

•    Require a reasonable attempt to notify tenants whose property may be subject to tax foreclosure. 

•    Eliminate arrest as a possible consequence of tax delinquency.  

•    Require that third parties who purchase tax liens be licensed as debt collectors. 

We will now seek opportunities to advocate for these changes to the Legislature, working alongside other advocates in this area, including GBLS and NCLC, to advocate for legislation that would enact them. The related bills filed this session have not yet had a legislative hearing.

—Michael Avitzur
Government Relations Director
Boston Bar Association

BBA Offers State House Testimony on Probate and Family Law Legislation and on Right to Counsel

Over the past two weeks, the Legislature has kicked its hearing schedule into high gear, ahead of the traditional August lull.  As a result, we’ve been busy presenting testimony, with simultaneous hearings this week addressing multiple BBA bills.  At one point, we even had witnesses testifying at virtually the same time on two different floors of the State House.

All of the thousands of bills that are filed each two-year session are entitled to a public hearing before the legislative committees to which they are respectively referred for consideration, generally between May of the first year and February of the second year.  This can produce a log-jam, with overlapping hearings—often covering dozens of bills at a time—held at key points in the timeline.

The BBA testified on four bills this week—three of them long-standing priorities, plus one urgent addition to our portfolio—and on a set of bills last week reflecting the Council’s vote last month to join the Right to Counsel Coalition:

On July 23rd, the Judiciary Committee held a hearing to cover all their legislation on probate and family law—nearly 60 in all.  The BBA actually spoke through two witnesses, Brad Bedingfield of Hemenway & Barnes, and Gayle Stone-Turesky of Sugarman Rogers.

  • Brad offered testimony in support of An Act making corrections to the adopted children’s act (S. 872), filed by Senator Cynthia Stone Creem.  This bill would make corrections consistent with the SJC ruling in Bird v. BNY Mellon, 463 Mass. 299 (2012) in order effectively to restore the law of 1958, whereby adopted persons covered by pre-1958 instruments are presumed to be excluded from familial trust terms unless they were adopted by the testator or settlor. 
    • It’s a complicated issue, with a number of twists and turns over the past 60+ years, but you can learn more about it here and read our testimony here.
  • Gayle was speaking as part of a joint bar-association panel, with representatives from the MBA, WBA, and the Academy of Matrimonial Lawyers—as well as an accountant with deep experience in family-law cases, who is uniquely positioned to speak about the uncertainty surrounding alimony guidelines in Massachusetts ever since the federal tax code rendered new alimony awards non-deductible to the payor as of this year.  This, too, is an issue that’s difficult to explain, but you’ll find a primer here.
    • Gayle and others endorsed legislation filed by Rep. Sheila Harrington (H. 3701) to effectively restore the status quo in that area, but also in support of enactment of the Uniform Child Custody Jurisdiction Enforcement Act (UCCJEA), through S. 886 (also filed by Sen. Creem).  Massachusetts is the only state that has not yet joined this interstate compact, by which all other states honor one another’s pre-existing custody orders, even when one of the parties moves across state borders.  (More on that issue here.)

Meanwhile, that same day, the Revenue Committee heard a bill (among nearly a hundred others related to the personal income tax) that also affects trusts-and-estates practitioners.  That bill, An Act to continue tax basis rules for property acquired from decedents (H. 2590), may be the most complex of all of these.  Fortunately, we had George Cushing of McLane Middleton on hand to explain it to the assembled legislators.  The bill, filed by Rep. Alice Hanlon Peisch, would provide for continuation of the “step-up” in the Massachusetts tax basis in property acquired from a decedent, a step-up that was allowed for decades under Massachusetts law, until it unexpectedly fell out of the law in 2010 due to the technical interrelation of various federal and state tax statutes.  (For more, our testimony is here.)

The previous week, Mary Ryan of Nutter McLennen & Fish—past BBA President and long-time champion of access to justice—was our representative before the Judiciary Committee when they held a hearing on property and land issues.  Among the 66 bills on the agenda that day were four that would create a right to counsel for low-income tenants and landlords in eviction cases.  You may recall that the Council voted last month to join the new Right to Counsel Coalition in proposing guidelines to improve on those bills and create a workable framework to establish that right statewide.  Our recent post on this issue is here.

—Michael Avitzur
Government Relations Director
Boston Bar Association

State Budget Update: Now in the Governor’s Hands

The Legislature completed its work on a new state budget this week, sending a plan for the already-underway Fiscal Year 2020 (FY20) to the Governor.  To catch up, here’s our previous post, on the conference committee that worked out the final legislative budget from the original House and Senate plans.

We have been following four priority areas in particular, advocating for them throughout the process, and the news, as spelled out below, is positive on all fronts!  We’ll take some credit for that, of course, but the truth is, it’s always easier to make the case for funding in a year, like this one, when state revenues are outpacing expectations—in this instance, by nearly $600 million.

With the budget now in the hands of Governor Charlie Baker—who can sign off on the budget but also has the power to reduce or even strike individual line-items and other provisions—we sent him a letter this week, asking him to approve the following BBA priorities:

  • We will always support funding for civil legal aid, as a critical access-to-justice issue—especially since our 2014 report, Investing in Justice.  This year, the Legislature provided a significant jump of $3 million to the line-item of the Massachusetts Legal Assistance Corporation (MLAC), the state’s leading funder of legal-services providers, bringing their FY20 total to $24 million.
  • The organized bar is the only natural constituency for the judiciary, which must rely on the other two branches of government for its funding, so we take seriously our responsibility to advocate for their budget.  The judiciary is funded through a web of related line-items, but the bottom line (so to speak) is that this year, they are very satisfied with the appropriation they received from the Legislature, including funding for continued implementation of the Housing Court’s statewide expansion, which was first authorized two years ago.
  • We also advocate for the Committee on Public Counsel Services (CPCS), which provides representation to indigent persons in criminal and civil cases, and administrative proceedings, in keeping with the right to counsel under our laws and the Constitutions of Massachusetts and the United States.  This year saw robust funding for CPCS operations, including both staff and private counsel who take their cases, but the Legislature’s budget crucially also includes a so-called outside section, supported by the BBA, that would allow for a temporary expansion of CPCS’s emergency authority to waive statutory billable-hours limitations under certain limited circumstances, in order to address emergency shortages of attorneys willing to take cases in some regions.
  • A recent addition to our budget priorities is funding for post-incarceration residential re-entry services.  As indicated in our 2017 report on criminal-justice reform, No Time to Wait, such services can be a critical link in supporting successful re-integration, and thus a reduction in recidivism rates.  We were therefore pleased that the Legislature authorized $4.5 million in funding for such programs this year.

To reiterate, all of these measures are tentative, pending the decision of the Governor, who has until next week to decide.  In case of any reductions or outright vetoes, the Legislature would still have the opportunity to pursue overrides.

—Michael Avitzur
Government Relations Director
Boston Bar Association