6. Directionless and Judicial Sale results

While the Judicial Sale is an open and public market, the market results are without direction or purpose. A municipality is not able, beyond the enforcement of the building code, to direct or give purpose to the property. The buyer merely has the cost of acquisition, future tax obligations and the minimal costs of code compliance - grass, shrubs, trees and security. 

BUT, the municipality has the external costs inherent to the property. Any blighted and abandoned property diminishes property values for the citizens owning property in a municipality. A blighted and abandoned property substantially lessens the desirability of any neighborhood. There are the external costs of street maintenance, sewer service, water service, electric utility service, fire and police, etc. In other words, in the case of  blight and abandonment, every property owner in a municipality is injured by blight nnd abandonment. They are injured parties

A solution to creating direction and purpose for properties on the repository list is an administrative procedure in which an entity of a municipality can be created under Pennsylvania law. The administrative entity has the ability to create a public market with all liens cleared PLUS the ability to contract. That is, properties can be sold subject to the buyer committing to rehabilitation or demolition. Performance bonds can be part of the contract. The sale by the municipality will not be complete until the terms and conditions for rehabilitation or demolition are met. Preferences can be established. For example, owner occupancy or adjacent owner control, etc.  First and foremost, affordable home ownership comes to mind as a preference.

The name of the administrative entity is a “land bank.”

Often there is the presumption that the properties on a repository list are abandoned. Surprisingly, this is not always the case. It is possible to have a property on the repository list and continue to occupy the property. In Mercer County, unless an individual seeks for a property to be placed on a Judicial sale, the owner simply continues in a real estate tax free status!

One such glaring circumstance was discovered while examining the respository listings for the City of Sharon. Two rental properties and a residence by the same owner were found. One of the rental properties was placed on the respository list in November of 2008. Its has an accrued arrearage of $22,140.40 (4 G 12). Another rental property by the same owner was placed on the list in December of 2010 and has an arrearage of $20,543 (4 G 10). The residence by the same owner was placed on the list in November of 2007 and has an arrearage of $67, 675 ( 1 P 25). The total is currently at $110,358.44.

Such a remarkable situation could change if a person sought the properties to be listed for Judicial sale. It is assumed that the current owners would not have a right of preemption as they would in an Upset Tax Sale. There, in an Upset tax Sale, as owners, they can prempt, that is, take precedence in repayment of owed taxes over persons interested in doing so prior to an Upset Tax Sale.

Now a Judicial sale would subject the properties to competitive market bidding that the owner may or may not meet and surpass. Should the owners in this example prevail as the highest bidder at Judicial sale they might do so for considerably less than for the actual tax arrearage and at the same time have any and all other liens that might exist cleared, null, expunged. A business practice of nonpayment of real estate taxes would be changed to a new baseline into future as tax lens and other liens would be expunged!

While a repository list is a theoretical market for tax delinquent properties, by itself it is useless without a catalyst. A catalyst is a substance added to the components of a chemical reaction that with the addition of the catalyst makes the chemical reaction happen to form a new substance. No catalyst, nothing happens.

A “land bank” can be the catalyst to create direction and purpose for a property at Judicial Sale.