Midcoast towns see sharp increase in liens due to delinquent property taxes

This house at 328 Limerock St. was taken by the city in March after a tax lien was not paid.
This house at 328 Limerock St. was taken by the city in March after a tax lien was not paid. Buy Photo
Posted Sept. 19, 2012, at 2:12 p.m.
Last modified Sept. 19, 2012, at 3:48 p.m.

Many towns and cities in Maine are experiencing significant increases in the number of property owners unable to pay their taxes, leading to more liens being placed on those homes and businesses.

Jim Murphy — who is an assessors’ agent for several midcoast towns including Union, which saw a 44 percent jump in liens to 118 in the last year — said he is not sure why there has been such a sharp increase.

“Each individual homeowner has a reason for not paying. That there are so many is a concern,” he said this week.

There were 71 liens filed in 2007 in Union, before the so-called Great Recession began.

Eric Conrad, director of communications and educational services for the Maine Municipal Association, said while the association does not maintain information on the number of liens filed by towns, anecdotally he has heard of an increase in them statewide.

“The economy is not picking up,” he said.

The Maine Bureau of Revenue Services’ property tax division also does not maintain statewide lien information.

But an informal survey by the Bangor Daily News indicates that many other midcoast towns are seeing increases in the number of tax liens they are filing, although most were less dramatic than Union’s.

Belfast put liens on 306 properties, up 10 percent from 278 in 2011. The amount of taxes owed on those liens is in excess of $500,000. In 2007, there were 251 liens filed.

Rockland filed 187 liens earlier this month, up only four from 183 in 2011. The city filed 166 liens in 2007.

Rockland Tax Collector Susan St. Clair said notices are sent out by certified mail to each property owner who has not paid taxes in full 30 days before the liens are to be filed. She said in some cases people had paid their taxes late and sent in a payment but failed to pay the interest charge and then they end up with a lien.

She said in other instances, such as with businesses, a tax payment may just slip through the cracks. For instance, she said the company with the greatest amount of taxes owed to the city from the liens filed this year contacted her Tuesday after it had received a telephone call from the Bangor Daily News asking about its lien status. The company representative said she was unaware that the bill had not been paid and the money was being sent immediately.

Camden filed 98 liens, up from 93 last year. Camden filed 66 liens in 2007.

Thomaston filed 115 liens earlier this month, up from 90 in 2011. The town filed 69 liens in 2007.

Once liens are filed on a property, the owner has 18 months to pay off the delinquent taxes, interest and the fees incurred by a municipality to file the documents at the county registry. If the taxes are not paid after 18 months, the properties are automatically foreclosed on by the local governments.

Conrad said municipalities have no interest in acquiring properties in this manner.

“Municipalities don’t want to be in the property business, They don’t want to own properties. They do what they can to work with the property owners,” Conrad said.

John Falla said that in the 25 years he has been town manager of St. George, he is not aware of any time the town has taken a property from an owner who wanted it. The town has a policy of working with property owners to work out payment plans.

Still, St. George placed 164 liens on properties this year, up sharply from 100 in 2011. Falla said he believed that 64 percent jump was due mainly to a change in the town’s tax year and the decision to bill twice a year. He said many people came in after the lien notices went out and said they simply had forgotten to make the second half installment on property taxes.

In 2007, St. George had 56 liens applied to properties.

In Waldoboro, the number of liens filed this year totaled 268, up from 252 in 2011. Waldoboro Tax Collector Rose Roy said the number fluctuates from year to year, adding that this year was not the most she has ever filed.

After the liens are filed, she said the town will send out notices alerting the owners that they risk losing their properties if they do not pay off the back taxes, interest and fees. Typically, 60 to 70 notices are sent out near the foreclosure deadline, Roy said and 12 to 13 properties are foreclosed on each year.

But town officials, Roy said, still work with the former owners to pay off the taxes and regain their properties. When that fails too, the town eventually will sell the properties to collect the tax.

In Rockland, the city acquired one property this year through tax foreclosure. The property was a single-family home on Limerock Street with a three-quarter-acre lot.

The property is assessed by the town at $164,800. The city sought bids on the property on July 2 but received none, according to Rockland City Attorney Kevin Beal. The city then listed the property through a real estate broker and it remains for sale.

The property is being sold for $25,000, Beal said, noting that it needs a lot of work such as repairs to the roof. Properties that are taken for nonpayment of taxes often are sold at far less than their assessed value anyway, Beal acknowledged.

The lien on the Limerock Street property was for $1,694 in property taxes.

The city will issue a quit claim deed to someone who buys the property, meaning the city quits any claim it has to the land or buildings. Beal said that all the city is selling is its interest in the property.

He explained that state law dictates that foreclosure from a tax lien wipes out other liens but that other lien holders, such as a bank, still can challenge someone’s ownership after the fact. Since quit claim deeds do not provide any guarantee of title, such sales are for far less than the real value of the property.

Thomaston assessors’ agent David Martucci said more properties are not foreclosed on for nonpayment of taxes because banks will foreclose on the property owner first and the bank then will pay the back taxes to protect its investment in the property.

There have been 117 foreclosure notices filed thus far this year in Knox County by banks, according to filings recorded at the Registry of Deeds. This is down from 144 filed for the same period last year. There were foreclosure actions taken by banks in every community in the county, with the most being filed in Rockland, with 22 notices. The second most was for properties in Rockport, with 13 notices, followed by 10 each in Camden and Warren.

Murphy, the assessor’s agent for several towns, said that in addition to bank foreclosures, there are many instances of people simply moving out of homes when they are unable to keep up with mortgage payments. He said he is seeing an increase in auctions in which ownership of the homes then immediately goes to the bank and then to a new owner.

This has created a shadow real estate market which he acknowledges has dragged down the price of homes on the lower end of the price range.

“I’m seeing properties that are going for 40, 50, 60 percent [of their value],” Murphy said.

When there is an increase in people not paying their property taxes, it also means that municipalities’ revenue flows are squeezed. Municipalities must borrow money from banks in the form of tax anticipation notes in order to meet payrolls and pay operating costs.

Murphy noted, however, that the municipalities eventually gwill et the tax money, although it may be a few years later than when it was expected.

Fortunately, the interest rates on such loans are near historic lows. For example, Rockland is paying 0.98 percent on its tax anticipation notes this year.

But the state allows municipalities to impose an interest rate of up to 7 percent on delinquent property taxes. Most municipalities will impose the maximum rate, saying it is needed to encourage people to pay their taxes.

The issue has been a point of contention in Rockland at times when councilors have debated whether the rate the city imposes should be less to offer relief to people facing difficult financial times.

Rockland Finance Director Tom Luttrell said the city had not borrowed any money for the past two years but borrowed some for a two-week period in September until property taxes began being paid for this year’s bills.

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