Dayton’s got about 11,000 tax-delinquent properties but the Montgomery County Treasurer says there’s a few tools that can help bring some neglected and blighted parcels back into productive use.
Treasurer John McManus said he encourages private citizens to consider initiating judicial foreclosures on tax-delinquent properties they would like to own or see change hands.
McManus also said some of Dayton’s tax-delinquent properties may be eligible for expedited foreclosure.
There was a backlog of expedited foreclosure cases, as well as some administrative delays, but those issues are being resolved and the process can put properties on the path to redevelopment or reuse, he said.
“We’re cooking with gas again,” he said.
McManus also indicated he is open to bringing back some version of the Lot Links program, which was a very popular way for people to acquire neglected and abandoned properties at low costs, with the back taxes removed.
Dayton is home to about 66,000 taxable parcels, and about 55,000 of those are current on their taxes, McManus said.
The remaining 11,000 properties in the city owed nearly $148 million in delinquent taxes and assessments as of May 25.
The treasurer’s office said it files judicial foreclosures against some delinquent properties as a “last resort” in the collections process.
Foreclosure filings usually follow many attempts to collect taxes and the exhaustion of payment plan options, McManus said.
The treasurer’s office filed 287 judicial foreclosure cases last year and 230 in 2021. The office already has filed 116 cases this year, through the end of April.
But in addition to those cases, McManus said citizens can initiate judicial foreclosures on tax-delinquent properties through his office’s depositor foreclosure program. The program has received more than 245 applications since 2020.
Under the program, community members can initiate a tax foreclosure on eligible parcels by providing a $2,000 deposit for residential properties or a $3,000 deposit for commercial properties.
Deposits are credited to the purchase of the properties, if the applicants end up buying them at competitive auctions.
Deposits are returned if the applicants are not the highest bidders.
Just because someone initiates a foreclosure does not mean they are guaranteed the property.
Applicants have no obligation to purchase the properties, even though they put down a deposit.
Delinquent property owners can cancel the foreclosures by paying off their debts.
Tax-delinquent properties do not need to be abandoned or vacant to be eligible for a depositor foreclosure.
McManus said the depositor foreclosure program is a “powerful tool” that is not available in some Ohio counties. He said it gives private residents a way to acquire properties to make their homes or turn into an investment opportunity.
McManus said another way to address tax-delinquent properties is the expedited foreclosure program.
This program allows cities and landbanks to initiate foreclosures through an administrative process that goes through the Board of Revision, he said.
The expedited foreclosure process was the “vehicle” for Lot Links in the past, McManus said.
McManus said Dayton has about 4,775 properties that could be eligible for expedited foreclosure because the value of properties are less than the amount of delinquent taxes and assessments they owe.
However, he said many of these properties may not be eligible for other reasons, like if they are occupied or if they have active utilities or they were recently sold.
Expedited and administrative foreclosures have been challenged in the courts, but so far they have not been found to be entirely unlawful or unconstitutional.
A local backlog in expedited foreclosure cases was largely linked to a couple of court cases that questioned the legality of this process, said Todd Kinskey, Dayton’s director of planning, neighborhoods and development.
“As a result, all Board of Revision cases halted for an extended period of time,” he said. “When it restarted, all cases where the taxes did not exceed the impositions were dismissed by the county and the city issued refunds to the Lot Links applicant.”
The U.S. Supreme Court ruled in a Minnesota case last month states that seize and sell private property to recoup unpaid taxes cannot keep any additional funding they get from the sale other than what they are owed.
The local impact is still under review.
The depositor foreclosure program was highlighted in late 2019, by then-Treasurer Russ Joseph, when he ended the popular Lot Links program.
The depositor program was supposed to help achieve some of the same goals. But the program has had far fewer applications than the Lot Links program, and some people have complained that it is much less useful.
The Lot Links program began in 2008 as a way for property owners and citizens to acquire vacant and tax-delinquent properties. The program originally only involved vacant lots, but later it expanded to include properties with structures.
Under Lot Links, the city, in partnership with the treasurer, initiated an administrative tax foreclosure process when it received applications for vacant and tax-delinquent properties.
Applicants often could acquire the properties after a wait of about two years, generally for less than $2,500, and the process removed the delinquent taxes.
McManus said Lot Links was very effective and worked well. He said he would support its restoration if it was safe to do from a legal standpoint and if there were proper safeguards in place.
Unfortunately under the Lot Links program, too many people who acquired the properties did not rehab them and they continued to deteriorate or stayed in bad shape, he said.
He said he’d want to impose some kind of rules, like those found in a standard development agreement, to ensure the properties were fixed up.
“Also, too many grantees failed to pay their property taxes, resulting in the need for our office to initiate foreclosure,” he said. “Most importantly, though, any program that comes back cannot risk running afoul of the Supreme Court’s recent opinion regarding the requirements for administrative foreclosures.”