Bulletin: MA2020008

Dear Associates:

The Supreme Judicial Court recently issued its decision in Tallage Lincoln, LLC v. Williams, which addresses redemptions in tax title foreclosures. The decision is important because it includes an appendix with a comprehensive review of the tax collection and tax title process. This case, along with some recent decisions from the Land Court, the Appeals Court and the Supreme Judicial Court, offers much-needed clarity on tax takings, as well as the foreclosure and redemption processes. As such, we are issuing this Bulletin to remind you of the underwriting requirements when you encounter a tax taking, assignment of tax receivables, certificate of tax payment, or complaint to foreclose in your chain of title. Note that this bulletin does not address the effect on title of a completed tax title foreclosure and subsequent sale, and you should contact one of the Massachusetts underwriters if this appears in your chain of title.

UNDERWRITING GUIDELINES:

• If there is a recorded tax taking by a city or town which has not been assigned, you must obtain and record an instrument of redemption from the city or town in order to issue policies without exception for the tax taking. Note: a “clean” municipal lien certificate from the Collector is not sufficient to release the tax taking. You must contact the Treasurer for a payoff and record the instrument of redemption, which specifically references the tax taking by book and page, in the appropriate registry of deeds. A municipal lien certificate is also still required to address current taxes due.
• If the tax taking has been assigned by the municipality to a private party, you must record both an instrument of redemption from the municipality and a release from the current assignee.
• If the tax taking has been assigned and the assignee has also recorded one or more certificates of tax payment, in addition to the instrument of redemption from the city or town, you must obtain and record a release from the assignee that references satisfaction of both the underlying tax title and the certificate(s) of tax payment.
• If the tax taking has been assigned and there is also a recorded complaint to foreclose, you must obtain and record an instrument of redemption from the city or town and a release from the assignee; further, record an allowed motion to withdraw the complaint to foreclose or a dismissal.[1]

BACKGROUND:

In Tallage Lincoln, LLC v. Williams, 485 Mass. 449 (2020), the Supreme Judicial Court addressed whether the holder of a tax title by virtue of an assignment could include in the redemption amount subsequent taxes the holder paid to the municipality. The Court held that those payments could not be added to the redemption amount. Instead, the holder could (and in this case did) record certificates of tax payment pursuant to MGL c. 60, s. 60, which served as a lien against the property, separate and apart from the tax title and the redemption of the tax title. The case reinforces that these certificates are a lien on the real property, and just like any lien, a release is required to clear them from title. 

The facts of the Tallage Lincoln case are straightforward. The owners of property in New Bedford failed to pay their real estate taxes in 2011. In November 2011, the City took the property for unpaid taxes and recorded a tax taking with the registry of deeds. Over the next four years, the owners failed to pay any real estate taxes. For each of those years, pursuant to MGL c. 60, s. 61, the City certified the unpaid taxes to the tax title account. As a result, the taking included both the 2011 taxes and taxes for the years 2012 through 2015. In May 2016, the City auctioned certain of their tax title accounts, and Tallage Lincoln, LLC (“Tallage”) was the high bidder with respect to this property. The City assigned the tax title to Tallage, and later that year Tallage initiated tax title foreclosure proceedings in the Land Court.  The owners[2] of the property timely filed an answer with the Land Court and asserted their right to redeem by paying the amount owed on the tax title. At the same time, however, the owners continued not to pay the current real estate taxes on the property. In order to avoid another taking of the property by the City (which would have priority over Tallage’s interests in the property), Tallage paid the 2016, 2017 and 2018 taxes to the City, and the City issued certificates of tax payments to Tallage. The certificates were recorded at the registry of deeds, and pursuant to MGL c. 60, s. 60 acted as a notice of a lien on the property.

In 2018, Tallage asked the Land Court to enter a finding relative to the amount the owners needed to pay to redeem the title to the property. Tallage sought to include in the redemption amount not only the unpaid taxes from 2011 and the following four years (i.e., the amount of the City’s tax title account when it was auctioned) with interest, but also the taxes for the subsequent years (2016 through 2018) for which Tallage had recorded certificates of tax payment. The owners argued that there was no legal basis for including the subsequent tax payments in the redemption amount, and the Land Court agreed. Tallage appealed, and the SJC on its own motion transferred the case for review. The SJC affirmed the Land Court’s decision, holding that real estate tax payments made by assignees were a lien on the property under MGL c. 60, s. 60, but could not be added to the redemption amount in a tax title foreclosure proceeding.

Several recent decisions involving tax title assignments have made clear that an assignee from a municipality does not entirely step into that municipality’s shoes. The assignee can bring an action to foreclose the owner’s right to redeem the property, as could a municipality, however, there is no statute allowing a private party to add unpaid tax amounts to a tax title account. The court held this was solely the province of the collector and treasurer under MGL c. 60, s. 61. As a result, the court rejected Tallage’s argument that the issuance of a tax payment certificate under MGL c. 60, s. 60 should be seen as analogous to the certification of additional taxes to the tax title account under Section 61.

The Tallage decision is also notable because it includes an appendix outlining the steps involved in the tax collection process. The Court’s reasoning for including this information is laid out in the opinion: many homeowners are unrepresented in the foreclosure proceedings, the law in this area is difficult to understand, and the result for a hapless homeowner is the loss of their house and any equity they may have built up. While the appendix is technically dicta, it is a very good explanation of the often-complicated process of collection of real estate taxes in the Commonwealth.

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[1] See Ithaca Finance, LLC v. Lopez, 95 Mass. App. Ct. 241 (2019) (Holding that “[b]ecause the commencement of the foreclosure action vests exclusive jurisdiction in the Land Court with regard to the right of redemption once a foreclosure action is commenced in the Land Court, a property may not be redeemed by paying the outstanding tax liability directly to the municipality in which the property is located; instead, a party seeking to redeem must follow the procedure specified by the Land Court.”)

[2] As the SJC noted in the Tallage case, the tax taking by the City of New Bedford resulted in legal ownership of the property vesting in the City, with the owners of the property having the right to redeem. However, the defendants in the case are sometimes referred to as the owners of the property.

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