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Blurbs from the Bossman

New PA Lien Law Causes Confusion Among Realtors, Lenders
by Scott Perry | 2014/02/27 |

Recent changes to Pennsylvania's Lien Law have caused quite the confusion amongst the real estate, title and lending communities with regard to the indexing and reporting of delinquent property tax liens.  This article aims to help dispel some basic misunderstandings about the new law.

Blurbs from the Bossman ::


I've recently had several clients ask me about newly enacted changes to Pennsylvania law regarding how liens for delinquent property taxes are indexed.  Their questions reflect a series of misunderstandings about the legislation and the scope of its impact.

Act 93 of 2013, signed into law on November 27, 2013, amends Pennsylvania's Municipal Claim and Tax Lien Law.  Since then, there has been much confusion among the real estate and lending communities regarding the ramifications of this new law and how it will affect real estate transactions.  There has been great concern that the amendment changes the way examiners and abstractors search delinquent property taxes.  One client with whom I spoke was concerned that her vendor examiners would need to start searching the tax lien records to determine if there is a lien on any and all other real estate owned by a record owner in a given county because she has been told that “a lien on one property becomes a lien on all.” 

Essentially, all Act 93 does is to streamline the process which a local taxing authority must follow in order to reduce a delinquent property tax lien (which stays with the property) to a personal judgment (which follows the delinquent property owner).  The law regarding enforcement of personal judgments remains unchanged. 

This means that such a lien would need to be indexed against the owner personally before it could be considered a lien which would attach to "all" real estate owned by that person.  In other words, the only way it would attach to "all" of the owner's real estate holdings is if it was indexed in the Prothonotary's Office, which examiners should already be checking when doing a judgment search.

This method of indexing liens against real estate has been custom and practice in the Commonwealth for as long as I can remember, and as far as I can tell, would not be changed or affected by the new legislation.

DISCLAIMER:  This writer is not a licensed attorney.  This article is intended for general information purposes only, and should not be construed as a legal opinion or relied upon as legal advice.




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587 words | 11284 views | 5 comments | log in or register to post a comment


New PA Lien Law
This is a major change to Pennsylvania law - up to now, if a lien was recorded as a municipal lien, it only attached to the specific property that it was recorded against. Municipal liens, like mortgage foreclosures, did not need to be cited unless they applied to the specific real estate that you were searching. The new law now states that all municipal liens apply to all properties, which means that if you are searching someone who owns multiple properties and is in financial difficulties, that this will make short sales even more difficult than they already are.  
by Elizabeth Helman | 2014/02/28 | log in or register to post a reply

Not According to Brett Woodburn, Counsel for the Pennsylvania Association of Realtors


“Act 93, originally House Bill 388, only changed how municipalities reduce property tax claims and tax liens to a final judgment in that county.  As a result, municipalities no longer have to incur the expense of suing delinquent property owners to get a final judgment. This really expands the arsenal of weapons that municipalities have at their disposal to collect delinquent taxes and fees.”

“There is some concern that this amendment changed how title searchers and abstractors have to investigate or search property taxes or municipal liens.  Nothing in the amendment changes how we search, analyze and resolve judgment liens against real estate. Because it’s easier for municipalities to reduce delinquencies to a final judgment however, it stands to reason that municipalities will be more likely to pursue those delinquencies.”

Because the laws for enforcing personal judgments have not changed, they will have to be indexed before they become liens on any other real estate owned by the delinquent tax payer. This has been the law for years, and attorneys, real estate agents and title agents have been dealing with resolving money judgments against real estate for just as long. Act 93 has not increased the burden on title agents, real estate agents or attorneys.

Brett Woodburn, Counsel, Pennsylvania Association of Realtors (emphasis mine)


 
by Scott Perry | 2014/02/28 | log in or register to post a reply

Is this to say a tax lien on a particular property may attach to all?

I haven't read the amendment or new law, but from what you've said, it appears a county 

 

may convert a lien on property "A" to one on all property owned by that party simply by

re-indexing the lien, attaching it to his name (in addition to that specific parcel). Is that what you're saying?

 

 
by john gault | 2014/03/04 | log in or register to post a reply

Good Question, John


Under Pennsylvania law, delinquent property taxes are considered Municipal Liens. "Municipal Liens" attach to the specific piece of real estate, while "Judgment Liens" follow the person. The law was changed to make it easier for the municipality to reduce the lien to a judgment against the person, rather than simply a lien against a piece of property.  In order to attach to the owner’s other assets, the lien will need to be indexed as a personal judgment in the Prothonotary’s (civil) index.

Under the old law, owners of multiple properties were willing to let delinquent taxes accumulate on their low-value real estate holdings because the liens did not attach to their other assets. The amendment now gives municipalities the authority to go after the personal assets of owners who let taxes go unpaid on other properties they own.

Thanks for reading.  I hope this answered your question.

 
by Scott Perry | 2014/03/04 | log in or register to post a reply

PA Act 93

Relevant changes to the Act are items 2,3,4 and 5 (bold). To stress Scott's point, the lien must be reduced to a judgment (filed in the prothonotary) before it becomes a lien against any other property owned by the individual.

AN ACT

Amending the act of May 16, 1923 (P.L.207, No.153), entitled "An act providing when, how, upon what property, and to what extent, liens shall be allowed for taxes and for municipal improvements, for the removal of nuisances, and for water rents or rates, sewer rates, and lighting rates; for the procedure upon claims filed therefor; the methods for preserving such liens and enforcing payment of such claims; the effect of judicial sales of the properties liened; the distribution of the proceeds of such sales, and the redemption of the property therefrom; for the lien and collection of certain taxes heretofore assessed, and of claims for municipal improvements made and nuisances removed, within six months before the passage of this act; and for the procedure on tax and municipal claims filed under other and prior acts of Assembly," further providing for municipal and tax claims and liens.

The General Assembly of the Commonwealth of Pennsylvania hereby enacts as follows:

Section 1. Section 3(a) and (a.1) of the act of May 16, 1923 (P.L.207, No.153), referred to as the Municipal Claim and Tax Lien Law, amended August 14, 2003 (P.L.83, No.20), are amended to read:

Section 3. (a) (1) All municipal claims, municipal liens, taxes, tax claims and tax liens which may hereafter be lawfully imposed or assessed on any property in this Commonwealth, and all such claims heretofore lawfully imposed or assessed within six months before the passage of this act and not yet liened, in the manner and to the extent hereinafter set forth, shall be and they are hereby declared to be a lien on said property, together with all charges, expenses, and fees incurred in the collection of any delinquent account, including reasonable attorney fees under subsection (a.1), added thereto for failure to pay promptly; and municipal claims and municipal liens shall arise when lawfully imposed and assessed and shall have priority to and be fully paid and satisfied out of the proceeds of any judicial sale of said property, before any other obligation, judgment, claim, lien, or estate with which the said property may become charged, or for which it may become liable, save and except only the costs of the sale and of the writ upon which it is made, and the taxes, tax claims and tax liens imposed or assessed upon said property.

(2) A claim for property taxes that has been reduced to judgment shall be enforceable as a lien against real property in the same manner and to the same extent as a judgment for money under the generally applicable laws of this Commonwealth. For purposes of this clause, "reduced to judgment" means a claim rendered absolute under section 311 of the act of July 7, 1947 (P.L.1368, No.542), known as the "Real Estate Tax Sale Law," and those given the effect of a judgment in accordance with this act.

(3) Notwithstanding any other provision of law, when a judgment or lien under this section is reduced or satisfied by payment or a sale of the property, the judgment creditor shall notify the tax claim bureau or prothonotary where the original tax claim is docketed and shall enter the satisfaction in the office of the clerk of the court in the county where the judgment is outstanding. No tax claim shall be subject to additional interest as a result of enforcement as a judgment lien under clause (2).

(4) A judgment lien under this subsection shall exist separate and apart from the tax lien.

(5) Nothing in this subsection shall be construed as affecting other remedies available to a municipality for collection of a tax or the priority or amount of a tax lien.

(a.1) It is not the intent of this [subsection] section to require owners to pay, or municipalities to sanction, inappropriate or unreasonable attorney fees, charges or expenses for routine functions. Attorney fees incurred in the collection of any delinquent account, including municipal claims, municipal liens, taxes, tax claims and tax liens, shall be in an amount sufficient to compensate attorneys undertaking collection and representation of a municipality or its assignee in any actions in law or equity involving claims arising under this act. A municipality by ordinance, or by resolution if the municipality is of a class which does not have the power to enact an ordinance, shall adopt the schedule of attorney fees. Where attorney fees are sought to be collected in connection with the collection of a delinquent account, including municipal claims, municipal liens, taxes, tax claims and tax liens, the owner may petition the court of common pleas in the county where the property subject to the municipal claim and lien, tax claim and lien or taxes is located to adjudicate the reasonableness of the attorney fees imposed. In the event that there is a challenge to the reasonableness of the attorney fees imposed in accordance with this section, the court shall consider, but not be limited to, the following:

(1) The time and labor required, the novelty and difficulty of the questions involved and the skill requisite to properly undertake collection and representation of a [municipality in actions arising under subsection (a)] municipality.

(2) The customary charges of the members of the bar for similar services.

(3) The amount of the delinquent account collected and the benefit to the municipality from the services.

(4) The contingency or the certainty of the compensation.

* * *

Section 2. This act shall take effect in 60 days.

 

 
by Ted Mullucey | 2014/03/17 | log in or register to post a reply
Blurbs from the Bossman

 

Thoughts, Observations
and Ruminations of an Independent Title Examiner Living & Working in the "Steel Buckle of the Rust Belt."

 

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