Cities and towns rarely earn a sizable profit — as Bedford did last year — when they seize a property and sell it for back taxes, according to several tax collectors and lawyers familiar with the process.
They say tax-deeded acquisition of property seldom happens because a property owner or bank will either sell the property or pay the taxes before a town exercises a tax deed.
When towns finally do so, the properties may sell for little because they are in bad shape.
Sometimes a town will refuse to accept a tax deed if pollution or substandard living conditions would create a headache, tax collectors said.
But it does happen, as it did last year, when Bedford sold a three-bedroom, $330,500 house it had seized from Richard Polonsky after he stopped paying his taxes.
Last week, the Supreme Court ruled that Bedford had to turn over profit from the sale — anything left over after taxes, interest and expenses were applied — to Polonsky.
He will get a check for $83,400.
In the ruling, the Supreme Court struck down a state law that allowed cities and towns to keep the profit if they hold on to the property for more than three years. That provision of the law amounted to an unconstitutional taking of property, the court ruled.
“I don’t think it’s going to affect us all that much,” said David Fredette, tax collector in Nashua. “Normally, after we sell it, there’s not enough to pay the back taxes.”
He and others say tax deeds are rare.
“Most people are going to find a way to pay their taxes,” said Joe Foster, a former New Hampshire attorney general who works for the McLane Middleton law firm and specializes in bankruptcy.
“It’s not a process you want to let it get that far,” Foster said.
They say selectmen and city officials work with people who are having a hard time, setting up payment plans if necessary.
A number of programs exist to reduce property taxes, including tax exemptions for elderly and disabled tax exemptions, tax credits for veterans, and deferrals for elderly taxpayers.
“It’s not on the agenda of municipalities ever to own taxpayer properties,” said Stephen Buckley, legal services counsel for the New Hampshire Municipal Association, which filed papers supporting Bedford in the case.
Buckley said the Supreme Court gave no guidance about what towns should do about the profits from previous sales of tax-deeded properties.
For example, two years ago Manchester made $55,100 when it sold a property that it tax deeded in 2012, said city Tax Collector Brenda Mascewic.
“Our city solicitors will need to review the case and the decision, then weigh in on how the ruling affects the excess proceeds for that property,” she wrote in an email.
Otherwise, Manchester has no other properties in that situation. In the past five years, it has issued an average of about seven tax deeds each year, she said.
Each property was either repurchased by the owner or sold at auction within the three-year time period, and the profits were turned over, she said.
Concord has had no tax-deeded sales in the past three years, according to city spokesperson Stefanie Breton.
Nashua has deeded two multi-family homes and one vacant lot over the past few years, Tax Collector Fredette said.
Both multi-family homes needed repair. He said one will be put up for sale this spring and may make a profit. Some buildings and lots are likely to be deeded this year, but usually that prompts an owner to either pay the taxes or sell the property and pay taxes.
“The city is not in the business of being a landlord. We try our very best to work with all taxpayers not to deed if at all possible,” he wrote in an email.
A lawyer for New Hampshire Legal Assistance, which filed a brief on behalf of Polonsky, said towns need to do a better job of encouraging struggling property owners to apply for property tax relief.
Ruth Heintz, the managing partner of the North County office of Legal Assistance, said state law requires towns to prominently inform taxpayers about relief measures in their bills, but some towns do not do so.
Once a lien or tax deed is issued, fewer options are available, she said.
She expects that may residents will find it difficult to pay tax bills because of the economic shock from the COVID-19 pandemic.