This woman’s family thought her $639.47 tax bill was paid off. They didn’t know the D.C. tax office still listed a debt: $44.79. Because of the mix-up, she lost her home.
she lost her home.
District tax officials have made hundreds of mistakes in recent years by counting property owners as delinquent even after they paid their taxes, forcing them to fight for their homes in grueling legal battles that in some cases persisted for years, The Washington Post found.
Since 2007, the D.C. Office of Tax and Revenue put nearly 1,900 owners at risk of foreclosure by imposing liens on their properties and then erroneously selling them to investors at public auctions.
The sales have stunned property owners across the city — many of them elderly and poor — who have scrambled to attend court hearings and plead with city officials to clear their names.
HOMES FOR THE TAKING:
LIENS, LOSS AND PROFITEERS — Part 3 of 3
Part 1: How a small debt becomes a big problem
Part 2: Suspicious bids go unnoticed in D.C.
A 48-year-old math teacher paid his taxes in 2007, but the tax office took his $1,400 payment and applied it to the wrong house, crediting an entirely different taxpayer.
A 58-year-old bank employee almost lost her house in 2010 because the tax office mistakenly sent bills and notices to a wooded lot across from a strip shopping center in Virginia — 12 times.
A 69-year-old hat designer was given the wrong payoff amount and ended up in court to save her property, owned by her family since 1943.
Those homeowners found out about the mistakes in time to fight. Ninety-five-year-old Daisy Dolsey, living in a nursing home and struggling with Alzheimer’s, wasn’t so lucky: She lost her $300,000 house over a $44.79 tax debt even after she paid her taxes.
“It really is the stereotype of bad government — it’s appalling,” said Amy Mix, a lawyer for AARP’s Legal Counsel for the Elderly,which has turned up numerous errors in tax lien cases. “It’s not enough people doing their jobs and not enough people caring.”
For more than a century, the District has placed liens on properties when owners failed to pay their taxes, then sold them at auctions. The investors buying the liens charge owners interest and often hefty fees on top of the tax debt and can take the properties through foreclosure if the money is not repaid.
But one in every five liens has been sold by mistake, forcing the tax office to later cancel the sales — and pay hundreds of thousands of dollars to compensate the investors who bought them.
The tax office’s own records show a series of errors, from failing to credit taxpayers for their payments to applying money to the wrong accounts.
One former official, Chester Carr, described the breakdowns inside the agency in recent years: thousands of payments coming into the office that tax officials could not match to the proper accounts. Carr said he feared the tax office was instead declaring taxpayers delinquent and selling the liens at auction.
“People’s properties would be sold erroneously,” said Carr, a former operations manager who left the tax office last year and is now a lead analyst for real estate assessments in Arlington. “Lots of times, they just gathered up the files that were delinquent and said, ‘Here, this is what we’re going to sell.’ ”
Tax office officials defend the program, saying they quickly match payments to the right accounts and have taken steps to cut back on errors, including mailing more notices to homeowners and posting updated payments on the tax office’s Web site.
They blamed many of the canceled liens on property owners, saying they waited too long to settle their bills.
“Canceled or voided sales do not indicate that the tax office made a mistake,” the agency said in a written statement. “In the past, this problem occurred because the property owner made a payment so close to the real property tax sale that the payment could not be processed before the tax sale took place.”
But tax collectors in several of Maryland’s largest counties say they fixed that problem years ago: In Montgomery, Prince George’s and Howard counties, payments post immediately and error rates are down to 1 percent or less, officials said. The District’s rate averaged 21 percent from 2007 to 2012.
“It’s terrible — that’s phenomenally high,” said Stan Willis, the former treasury chief in Prince George’s. “If I had a 20 percent voided rate, golly, I’d be looking at the accuracy of my data and realizing that we had a lot of work.”
Stephen Cordi, the District’s deputy chief financial officer, said the tax office’s errors “have dropped dramatically,” citing only 85 canceled liens in 2012.
But that was still a 7 percent error rate, which followed a 34 percent error rate the year before.
“When is the nightmare going to be over with?” said 64-year-old Carmen Starks, who found herself fighting to save her home even after she paid her taxes.
The tax office took four days to credit her payment in 2010, a delay that triggered an $8.61 interest charge — enough to keep her delinquent and allow a tax lien investor to press to foreclose on her rowhouse in Northwest Washington.
Starks discovered the error. Dolsey did not.
In 2004, the retired seamstress didn’t pay her $406 tax bill, prompting the city to put a lien on her home in Northeast Washington, in a leafy neighborhood with wide front porches and backyard swing sets. In July 2005, the tax office sold the lien at auction.
When relatives found out less than two months later, they paid the city on behalf of Dolsey, who was 88 at the time. Her niece, Deborah Miller, an IRS auditor, said she paid exactly what the tax office told her by phone to bring the account current — $639.47.
But the tax office never lifted the lien, allowing the tax lien purchaser who bought it to press for foreclosure in February 2006. The company was owned by Steven Berman, who was later convicted of rigging tax lien auctions in Maryland.
When his company tacked on $5,600 in legal fees and other costs — 14 times Dolsey’s original tax debt — the family couldn’t pay, and the house was taken by Berman’s company. The company’s law firm, which is run by Berman’s wife, said it was willing to reduce the fees to $3,500. Family members said recently that they could not come up with the money.
In response to questions from The Post, the tax office said Dolsey’s lien remained active because she still had $44.79 left on the books after Miller had paid the tax debt. The agency produced an undated bill showing what officials said she owed at the time. No other records reviewed by The Post, including subsequent bills and account statements, reflect a $44 shortfall.
Miller said she received no notification that the family still owed money and had paid exactly what she was told.
“If I had owed them $40 more, then why didn’t someone tell me?” said Miller, 61. “It’s ridiculous — period.”
Cordi said he couldn’t speak to whether the family was given an accurate payoff amount by the tax office.
“They were $40 short,” he said. “It was properly foreclosed on.”
The family was outraged when it learned from The Post that the $44 shortfall had cost Dolsey the family home of five decades.
“I feel terrible,” said Michael Zimmerman, Dolsey’s nephew. “You pay your taxes. You do the right thing. You’re entitled to honest government that puts you first.”
The tax office, an arm of the D.C. Office of the Chief Financial Officer, has been warned by its own auditors for years about poor record-keeping and a sweeping lack of controls that undermine one of the most important functions in municipal government.
But the blunders in the tax lien program have never come to light.
Of the 9,000 liens sold at auction in the past six years, nearly 1,900 were put up by mistake, risking homes, land and commercial buildings, a Post analysis shows. The total value of the property: more than $900 million.
Year after year, the tax office quietly canceled the liens even as the agency dipped into taxpayer funds to pay more than $840,000 to compensate the purchasers who had bought them, and $730,000 to their lawyers.
But the greatest impact was on homeowners, who were exposed to a program dominated by aggressive purchasers demanding thousands in fees on top of the tax debt — and taking homes when families couldn’t pay.
Photos: Office's mistakes upend lives
Nearly 200 liens were picked up by Aeon Financial, a Chicago firm harshly criticized by the District’s attorney general in 2009 for allegedly exploiting families with excessive fees. More than 270 were purchased by companies managed by Berman, who was sentenced in 2010 for rigging tax auctions in a massive criminal case in Maryland.
In many cases, it took the tax office months to cancel the liens, leaving homeowners in legal limbo with their houses on the line.
Starks, who faced losing her house in Northwest Washington, spent more than two years working with lawyers from the Legal Counsel for the Elderly and catching the bus to the courthouse, her bills stuffed in her purse.
She had borrowed $5,094 from a friend to pay her back taxes in 2010. She had no idea that a tax office mistake had kept her delinquent.
“I was feeling good, that everything was taken care of, and I didn’t have anything else to worry about,” she said.
But when a friend dropped her off from noon prayer service two years ago, she found a court summons tacked to the door. “What’s that on your door, sister Starks?” her friend asked.
That’s when Starks discovered the case was still active and that a tax lien purchaser was pushing to take the house in court — and had tacked on $2,663 in legal fees. Her lawyers recently persuaded the tax office to cancel the lien.
“At this age of my life, I shouldn’t have to be concerned about stuff like this,” said Starks, who owns the home free and clear.
The nearly 1,900 liens sold by the tax office were scattered throughout every ward of the city, from condominiums in Northwest to aging rowhouses in Southeast. The majority were sold because agency officials didn’t realize the taxes had been paid before the auction.
There were other problems, too.
For 69-year-old Theresa Banks, a former Sunday school teacher who designs women’s hats, the trouble started in 2007 when she went to the tax office and asked how much she owed on the lot next to her family home. She paid $1,100.
About a year later, she found a sign tacked to the door, showing a lien had been put on her property for unpaid taxes and a purchaser was moving to take the lot through foreclosure. She was terrified: Her family has owned the property since 1943, when the Marshall Heights neighborhood had no running water or paved streets.
With the help of a nonprofit attorney, Banks fought in court, arguing that she had received an incorrect payoff amount, which had left her account deficient.
In 2009, the agency canceled the sale.
Banks, who has hip problems and walks with a cane, said she made at least four trips to court to save her land.
“You’re black. You’re poor. This is the only thing you have to hold onto,” she said.
Carr, the former tax official, said the breakdowns in the office were so extensive that thousands of pieces of mail were returned each year and never re-sent. Carr said he worried that taxpayers weren’t getting their tax statements — let alone warnings that they were delinquent.
“The mail just sat there and sat there,” he said.
Until late last year, the tax office kept a log of returned mail, but it has since lost it, a court document shows.
Carr also said that tax officials have struggled to link payments to the proper accounts, often because taxpayers failed to provide enough information about their properties.
Agency officials said that they have worked to match the payments to the right accounts. “We make every effort to apply payment to the taxpayer account,” the agency said in a prepared response.
But local housing groups said they have been helping homeowners deal with the tax office’s mistakes for years.
“It’s ridiculous,” said Laura Newland, a former Legal Counsel for the Elderly attorney who has worked with hundreds of property owners. “Homeowners are thinking they are going to lose their house — through no fault of their own.”
Jennifer Jenkins contributed to this report.