County copes with effect of new tax foreclosure sale law

Changes in federal law have altered the way proceeds of tax foreclosed properties are distributed, leaving county officials uncertain of how these changes will impact the county's annual budget. (Sun file photo)

NORWICH – Navigating changes in federal law that alter the way proceeds of tax foreclosed properties are distributed, Chenango County officials are uncertain of the impact those changes will have on the county’s annual budget.

The county has long held the tradition of selling tax foreclosed properties to the highest bidder. However, the practice was upended by a 2023 ruling of the U.S. Supreme Court which favored 
a 94-year-old Minneapolis woman, allowing her to recoup some money after her county kept the entire $40,000 when it sold her condominium over a small unpaid tax bill.

The justices ruled unanimously that Hennepin County in Minnesota infringed the constitutional rights of the woman, Geraldine Tyler, by possessing her property without offering her "just compensation.”

The landmark ruling has altered the way Chenango County can proceed with tax foreclosed properties, making it difficult for bookkeepers to be certain of the net gains and losses of properties that have been auctioned off. The new legislation applies to surplus derived from any tax foreclosure sales conducted after May 25, 2023.

Under stipulations of the new law, the county can now auction off properties which have undergone tax foreclosure and keep only the money owed on taxes before giving residents and lienholders a chance to claim the rest. Homeowners have up to three years to make a claim, while lienholders have 30 days from the time the county files its sales report to the court.

The county can also claim up to $250 or 2 percent of what’s owed in penalties and interest, whichever is higher.

“We no longer have revenues on our tax sales within the year that we sell them,” explained Chenango County Deputy Treasurer Barbara Streir. “We might in three years if our surpluses go unclaimed.”

In 2023, the county sold off 46 properties, collecting nearly $494,000 in surplus gains and taking a $181,500 hit in net losses; but because of changes to the tax sale law, county officials don’t know how much of those gains can be applied to the fiscal yearly budget.

“The law requires that for any of those sales, we have to report to the court by the beginning of October,” said Chenango County Attorney Zachary Wentworth. 

The Chenango County Board of Supervisors passed a resolution last week authorizing disbursement of revenue derived from the tax foreclosure sale held on Aug. 5, 2023.

“Essentially those funds will get paid and put into an account or accounts. Normally, if money is paid into court for somebody, the treasurer’s office is required to track financial information for each proceeding,” said Wentworth. “It’s unclear if we’re going to have to do that for each of the gains or if we’ll be able to do one account for that sale. We’re still trying to determine that.”

The county did not hold a tax foreclosure sale in 2024. Officials say they want to see the consequential impact of the new legislation before holding another auction. Tax foreclosed properties will be added to the roster for the 2025 auction.

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