D.C. Council orders review of cases where people lost homes over small tax debts

September 17, 2013

D.C. Council members brought more momentum to calls for reform of the city’s troubled tax lien program Tuesday by ordering city officials to decide whether homeowners who lost their properties over small tax debts in the past decade should be compensated.

The move, which unanimously passed in emergency legislation, will for the first time open reviews of foreclosures over liens of less than $2,500 to determine if families were treated fairly by tax officials and the private investors who ultimately took their homes.

“It’s a good first step,” said Michael Zimmerman, whose 95-year-old aunt, Daisy Dolsey, lost her home over a $44 debt while she was in a nursing home. “It paves the way for people who unjustly lost their homes or property to find out what really happened.”

The order follows a Washington Post investigation that found hundreds of D.C. taxpayers lost their homes and land to an often predatory system of debt collection that allowed out-of-town investors to buy up liens, tack on thousands in fees and then press to take the properties if the money wasn’t repaid.

Unlike many other cities and states, the District has offered few protections for struggling property owners, despite repeated calls for change by families and housing advocates. The Post found that many of the homeowners who lost their properties were elderly and disabled, including a 65-year-old man who was in a coma and dying of cancer when a tax lien investor took his house.

In addition to the legislation to probe foreclosures, introduced by council member Mary M. Cheh (D-Ward 3), the council also approved emergency measures that cap the fees charged by investors at $1,500 and ban the sale of liens for less than $2,000.

Last Friday, Mayor Vincent C. Gray (D) and Chief Financial Officer Natwar M. Gandhi also announced they would cancel dozens of tax liens sold at the annual auction two months ago and create an ombudsman to work with distressed homeowners.

Since The Post’s series ran last week, council members have been debating a host of ways to change the city's century-old program, including a proposal by Tommy Wells (D-Ward 6) to scrap sales of tax liens altogether and have the city recoup back taxes on its own. “Why do we even allow this practice?” he asked while abstaining from Tuesday’s vote on caps for legal fees.

Jack Evans (D-Ward 2), who introduced the legislation capping fees, said the council will take a much broader look at the entire system while deliberating on a permanent bill. Pedro Ribeiro, a spokesman for the mayor, said he expected Gray to sign the bills as soon as they reach him. Once signed, emergency bills are effective for 90 days.

The review of the foreclosure cases will be carried out by auditors in the city’s finance office, which must submit its findings by the end of January.

One local housing lawyer applauded the council’s decision to examine the foreclosures, including the case of Bennie Coleman, a 76-year-old Vietnam veteran who lost his home over a $134 tax debt in 2010 and now lives in an assisted-living facility a mile away.

But she questioned whether the cases should be reviewed by the Office of the Chief Financial Officer, which oversees the tax lien program.

“I think it should an outsider looking in,” said Amy Mix, a lawyer for AARP’s Legal Counsel for the Elderly, which represents struggling homeowners.

Cheh said the review of foreclosures will allow auditors to look at whether homeowners — and especially the elderly and disabled — were charged excessive attorney’s fees or were subject to mistakes by the tax office. She said it was important to impose caps on fees and limits on liens, but added, “What about those poor people who already were harmed?”

The government , she said, has to look for “an equitable, fair and compassionate solution.”

Steven Rich contributed to this report.

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