HomeMy WebLinkAbout(2) TAX FORECLOSED/SEIZED PROPTo: Steve Fitzgibbons, City Manager, City of Port Arthur
From: Clayton E. Mayfield, Managing Attorney
Date: March 24, 2005
Re: Proposal for the use of tax foreclosed or seized property for low /
moderate income housing
Based on my communication with Steve Fitzgibbons, City Manager for
the City of Port Arthur, Texas, it may be the desire of the City Counsel to
consider using some of the properties on which the city has a delinquent
property tax lien for the development of low to moderate income housing. I
have been asked to contact some of my firm's other offices to determine if
they are using foreclosed properties for low or moderate income housing
development and how those programs are structured. After some research, I
was able to review several types of programs and their structure. The types of
programs are as follows:
A. LAND BANKS The City of Dallas several years ago had
the legislature pass a bill allowing it to create a land bank to acquire and hold
unimproved property for transfer to qualified developers of low and/or
moderate income housing. There have been some successes for this program
but sufficient data is not available to recommend this program. The City of
Houston is now seeking to have the legislature pass a similar bill to allow it to
do housing development. I am attaching a copy of the Land Bank legislation for
your review.
March 24, 2005
B. FORECLOSED AND/OR SEIZED PROPERTIES Several of
our firm's offices work with cities using foreclosed or seized properties for low
or moderate income housing development. Using these types of properties
requires that the party pro-actively seeking to use them do the following:
1. Meet with the other taxing entities having liens on the property to
negotiate an inter-local agreement regarding the sale of these
properties, maintenance, taxes, and security (See §34.051 Texas
Property Tax Code);
2. Dete,mine a Title Company who will provide title insurance upon the
transfer of the property to a developer. We will need to meet with the
title company to assure that their underwriters understand what we are
trying to do and the law controlling housing development;
3. Setup criteria determining which properties will be seized and/or
foreclosed and sold;
4. Develop a method to select prospective purchasers.
It would be much more cost effective to purchase properties through a resale than at
the initial Sheriff's Sale. §34.051 allows property to be sold at a resale for the lesser of
the appraised value or the taxes set out in the judgment. This reduces the amount the
City would pay for the property and allows the Tax Assessor/Collector to write off
any balances.
If an inter-local agreement has not been completed or the City does not want to use
§34.051, it can still purchase the property at a resale for the lesser of the appraised
value or the taxes set out in the judgment. §34.05 Texas Property Tax Code allows for
the resale of property by private sale for the lesser of the appraised value or the taxes
set out in the judgment. This requires that each taxing entity must consent to each such
transfer before the sale can be completed. Consent to the sale must be made in an open
meeting of the taxing entities governing body.
Based on my prior experience in helping both the Cities of Beaumont and Port Arthur
obtain properties on which these entities had tax liens for low income housing
development, I would suggest that you look at properties in the following order:
2
March 24, 2005
A. Properties that have already gone to Sheriff's Sale and been bid into
the taxing entities - The properties in this category can be immediately
transferred to whatever agency the city desires for the lesser of the
appraised value or the taxes set out in the judgment. All legal work has
been completed. The period of redemption has been completed or is
running. The period, in which the property is subject to a collateral attack
by the former owner, is running. The former owner of a property has one
(1) year from the date of the sale to attack the validity ora tax sale.
B. Properties that are already under judgment - The legal work on
this category of property has been completed. The property is waiting
to be placed on a Sheriff's Sale list and given a sale date.
C. Properties that already have 5 years worth of delinquent and are
not in suit - Upon completion of an abstract to determine the true
owner and all lienholders and the filing of the proper motions and
affidavits, properties in this category can be seized and could be
placed for sale within ten days. Though the statue allows for sale
within ten days, it has been our policy to give notices, send certified
letters, and advertise the sale in the local newspaper for at least
twenty-one (21) days prior to the sale. This is to give the owner(s)
and/or lienholders sufficient time to protest the sale or pay the taxes.
D. Properties that have at least 3 years worth of delinquent taxes and
are not in suit - This category requires the same procedural steps as
"C" above with an additional requirement of an outstanding Health
and Safety Lien.
Using properties in this order would increase the speed at which a program
could be implemented. Additionally, it would reduce the cost and time
necessary to acquire properties.
If you have additional questions, please do not hesitate to contact me.
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LOCAL GOVERNMENT CODE - CHAPTER 379C Page 1 of 9
Clayton Mayfield
From: Para Johnson
Sent: Friday, March 11,2005 3:22 PM
To: Clayton Mayfield; Sharon Humble
Subject: Land Bank Demonstration Program
LOCAL GOVERNMENT CODE
CHAPTER 379C. URBA/~ LAND BANK DEMONSTRATION PROGRAM
§ 379C.001. SHORT TITLE. This chapter may be cited as
the Urban Land Bank Demonstration Program Act.
Added by Acts 2003, 78th Leg., ch. 299, § 1, eff. Sept. 1, 2003.
§ 379C.002. APPLICABILITY. This chapter applies.only
to home-rule municipalities that:
(1) have a population of 1.18 million or more; and
(2) are located predominantly in a county that has a
total area of less than 1,000 square miles.
Added by Acts 2003, 78th Leg., ch. 299, § 1, eff. Sept. 1, 2003.
§ 379C.003. DEFINITIONS. In this chapter:
(1) "Community housing development organization" or
"organization" means an organization that:
(A) meets the definition of a community housing
development organization in 24 C.F.R. Section 92.2; and
(B) is certified by the municipality as a
community housing development organization.
(2) "Land bank" means an entity established or
approved by the governing body of a municipality for the purpose of
acquiring, holding, and transferring unimproved real property
under this chapter.
(3) "Low income household" means a household with a
gross income of not greater than 80 percent of the area median
family income, adjusted for household size, for the metropolitan
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LOCAL GOVERNMENT CODE - CHAPTER 379C Page 2 of 9
statistical area in which the municipality is located, as
determined annually by the United States Department of Housing and
Urban Development.
{4) "Qualified participating developer" means a
developer who meets the requirements of Section 379C.005 and
includes a qualified organization under Section 379C.011.
(5) "Urban land bank demonstration plan" or "plan"
means a plan adopted by the governing body of a municipality as
provided by Section 379C.006.
(6) "Urban land bank demonstration program" or
"program" means a program adopted under Section 379C.004.
Added by Acts 2003, 78th Leg., ch. 299, § 1, eff. Sept. 1, 2003.
§ 379C.004. URBAN LAND BANK DEMONSTRATION
PROGRAM. (a) The governing body of a municipality may adopt an
urban land bank demonstration program in which the officer charged
with selling real property ordered sold pursuant to foreclosure of
a tax lien may sell certain eligible real property by private sale
for purposes of affordable housing development as provided by this
chapter.
(b) The governing body of a municipality that adopts an
urban land bank demonstration program shall establish or approve a
land bank for the purpose of acquiring, holding, and transferring
unimproved real property under this chapter.
Added by Acts 2003, 78th Leg., ch. 299, § 1, eff. Sept. 1, 2003.
§ 379C.005. QUALIFIED PARTICIPATING DEVELOPER. To
qualify to participate in an urban land bank demonstration program,
a developer must:
(1) have built three or more housing units within the
three-year period preceding the submission of a proposa~ to the
land bank seeking to acquire real property from the land bank;
(2) have a development plan approved by the
municipality for the land bank property; and
(3) meet any other requirements adopted by the
municipality in the urban land bank demonstration plan.
Added by Acts 2003, 78th Leg., ch. 299, § 1, eff. Sept. 1, 2003.
~ 379C.006. URBAN LAND BANK DEMONSTRATION PLAN. (a) A
municipality that adopts an urban land bank demonstration program
shall operate the program in conformance with an urban land bank
demonstration plan.
(b) The governing body of a municipality that adopts an
urban land bank demonstration program shall adopt a plan annually.
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LOCAL GOVERNMENT CODE - CHAPTER 379C Page 3 of 9
The plan may be amended from time to time.
(c) In developing the plan, the municipality shall consider
other housing plans adopted by the municipality, including the
comprehensive plan submitted to the United States Department of
Housing and Urban Development and all fair housing plans and
policies adopted or agreed to by the municipality.
(d) The plan must include the following:
(1) a list of community housing development
organizations eligible to participate in the right of first refusal
provided by Section 379C.011;
(2) a list of the parcels of real property that may
become eligible for sale to the land bank during the upcoming year;
(3) the municipality's plan for affordable housing
development on those parcels of real property; and
(4) the sources and amounts of funding anticipated to
be available from the municipality for subsidies for development of
affordable housing in the municipality, including any money
specifically available for housing developed under the program, as
approved by the governing body of the municipality at the time the
plan is adopted.
Added by Acts 2003, 78th Leg., ch. 299, ~ 1, eff. Sept. 1, 2003.
§ 379C.007. PUBLIC HEARING ON PROPOSED
PLAN. (a) Before adopting a plan, a municipality shall hold a
public hearing on the proposed plan.
(b) The city manager or the city manager's designee shall
provide notice of the hearing to all community housing development
organizations and to neighborhood associations identified by the
municipality as serving the neighborhoods in which properties
anticipated to be available for sale to the land bank under this
chapter are located.
(c) The city manager or the city manager's designee shall
make copies of the proposed plan available to the public not later
than the 60th day before the date of the public hearing.
Added by Acts 2003, 78th Leg., ch. 299, § 1, eff. Sept. 1, 2003.
~ 379C.008. PRIVATE SALE TO LAND
BANK. (a) Notwithstanding any other law and except as provided by
Subsection (f), property that is ordered sold pursuant to
foreclosure of a tax lien may be sold in a private sale to a land
bank by the officer charged with the sale of the property without
first offering the property for sale as otherwise provided by
Section 34.01, Tax Code, if:
(1) the market value of the property as specified in
the judgment of foreclosure is less than the total amount due under
the judgment, including all taxes, penalties, and interest, plus
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LOCAL GOVERNMENT CODE - CHAPTER 379C Page 4 of 9
the value of nontax liens held by a taxing unit and awarded by the
judgment, court costs, and the cost of the sale;
(2) the property is not improved with a building or
buildings;
(3) there are delinquent taxes on the property for
each of the preceding six years; and
(4) the municipality has executed with the other
taxing units that are parties to the tax suit an interlocal
agreement that enables those units to agree to participate in the
program while retaining the right to withhold consent to the sale of
specific properties to the land bank.
(b) A sale of property for use in connection with the
program is a sale for a public purpose.
(c) If the person being sued in a suit for foreclosure of a
tax lien does not contest the market value of the property in the
suit, the person waives the right to challenge the amount of the
market value determined by the court for purposes of the sale of the
property under Section 33.50, Tax Code.
(d) For any sale of property under this chapner, each person
who was a defendant to the ]udgmenn, or that person's attorney,
shall be given, non later than the 90th day before the date of sale,
written notice of the proposed method of sale of the property by the
officer charged with the sale of the property. Notice shall be
given in the manner prescribed by Rule 2la, Texas Rules of Civil
Procedure.
(e) After receip~ of the notice required by Subsection (d)
and before the date of the proposed sale, the owner of the property
subject to sale may file with the officer charged with the sale a
written request that the property not be sold in the manner provided
by this chapter.
(f) If the officer charged with the sale receives a written
request as provided by Subsection (e), the officer shall sell the
property as otherwise provided in Section 34.01, Tax Code.
(g) The owner of the property subject to sale may not
receive any proceeds of a sale under this chapter. However, the
owner does not have any personal liability for a deficiency of the
judgment as a result of a sale under this chapter.
(h) Notwithstanding any other law, if consent is given by
the taxing units that are a party 5o the judgment, proper~y may be
sold to the land bank for less than the market value of the property
as specified in the judgment or less than the total of all taxes,
penalties, and interest, plus the value of nonnax liens held by a
taxing unit and awarded by the judgment, court costs, and the cost
of the sale.
(i) The deed of conveyance of the property sold to a 19nd
bank under this section conveys to the land bank the right, title,
and interest acquired or held by each taxing unit that was a party
to the judgment, subject to the right of redemption.
Added by Acts 2003, 78th Leg., ch. 299, § 1, eff. Sept. 1, 2003.
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LOCAL GOVERNMENT CODE - CHAPTER 379C Page 5 of 9
~ 379C.009. SUBSEQUENT RESALE BY LAND BANK. (a) Each
subsequent resale of property acquired by a land bank under this
chapter must comply with the conditions of this section.
(b) The land bank must sell a property to a qualified
participating developer within the three-year period following the
date of acquisition for the purpose of construction of affordable
housing for sale or rent to low income households. If after three
years a qualified participating developer has not purchased the
property, the property shall be transferred from the land bank to
the taxing units who were parties to the judgment for disposition as
otherwise allowed under the law.
(c) Unless the municipality increases the amount in its
plan, the number of properties acquired by a qualified
participating developer under this section on which development has
not been completed may not au any given time exceed three times the
annual average residential production completed by the qualified
participating developer during the preceding 5wo-year period as
determined by the municipality.
(d) The deed conveying a propersy sold by the land bank muss
include a right of reverter so that if the qualified participating
developer does no5 apply for a construction permit and close on any
construction financing within the two-year period following the
date of the conveyance of the propersy from the land bank 5o the
qualified participating developer, the propersy will revere 5o the
land bank for subsequen5 resale 5o another qualified participating
developer or conveyance 5o the taxing units who were parties 5o the
judgment for disposition as otherwise allowed under the law.
Added by Acts 2003, 78th Leg., ch. 299, § 1, eff. Sept. 1, 2003.
§ 379C.010. RESTRICTIONS ON OCCUPANCY AND USE OF
PROPERTY. (a) The land bank shall impose deed restricslons on
property sold 5o qualified participatin~ developers requiring the
development and sale or rental of the proper~y 5o iow income
households.
(b) At least 25 percent of the land bank properties sold
during any given fiscal year 5o be developed for sale shall be deed
restricted for sale 5o households with gross household incomes no5
greater than 60 percent of the area median family income, adjusted
for household size, for the mesropolitan statistical area in whiuh
the municipality is located, as determined annually by the United
States Department of Housing and Urban Development.
(c) If propersy is developed for rental housing, the deed
restrictions muss be for a period of no5 less than 15 years and muss
require that:
(1) 100 percen5 of the rental units be occupied by
households with incomes no5 grea~er than 60 percen5 of area median
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LOCAL GOVERNMENT CODE - CHAPTER 379C Page 6 of 9
family income, based on gross household income, adjusted [or
household size, for the metropolitan statistical area in which the
municipality is located, as determined annually by the United
States Department of Housing and Urban Development;
(2) 40 percent of the units be occupied by households
with incomes nom greamer ~han 50 percen~ of area median family
income, based on gross household income, adjusted for household
size, for the metropolitan statistical area in which the
municipality is located, as determined annually by the United
states Department of Housing and Urban Developmenm; or
(3) 20 percent of the units be occupied by households
with incomes no5 greater than 30 percent of area median family
income, based on gross household income, adjusted for household
size, for the metropolitan statistical area in which the
municipality is located, as determined annually by the United
States Department of Housing and Urban Developmens.
(d) The deed restrictions under Subsection (c) mus~ require
the owner 5o file an annual occupancy report with the municipality
on a reporting form provided by the municipality. The deed
restrictions must also prohibit any exclusion of an individual or
family from admission 5o the development based solely on the
participation of the individual or family in the housing choice
voucher program under Section 8, United States Housing Act of 1937
(42 U.S.C. Section 1437ft, as amended.
(e) Except as otherwise provided by this section, if the
deed restrictions imposed under this section are for a term of
years, the deed restrictions shall renew automatically.
(f) The land bank or the governing body of the municipality
may modify or add to the deed restrictions imposed under this
section. Any modifications or additions made by the governing body
of the municipality muss be adopted by the municipality as par5 of
its plan and must comply with the restrictions set forth in
Subsections (b), (c), and (d).
Added by Acts 2003, 78th Leg., ch. 299, ~ 1, eff. Sept. 1, 2003.
~ 379C.011. RIGHT OF FIRST REFUSAL. (a) In this
section, "qualified organization" means a community housing
development organization that:
(1) contains within its designated geographical
boundaries of operation, as set forth in its application for
certification filed with and approved by the municipality, a
portion of the property that the land bank is offering for sale;
(2) has builE at lease three single-family homes or
duplexes or one multifamily residential dwelling of four or more
units in compliance with all applicable building codes within the
preceding two-year period and within the organization's designated
geographical boundaries of operation; and
(3) within the preceding two-year period has built or
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LOCAL GOVERNMENT CODE - CHAPTER 379C Page 7 of 9
rehabilitated housing units within a one-half mile radius of the
property that the land bank is offering for sale.
(b) The land bank shall first offer a property for sale to
qualified organizations.
(c) Notice must be provided to the qualified organizations
by certified mail, return receipt requested.
(d) The municipality shall specify in its plan the period
during which the right of first refusal provided by this section may
be exercised by a qualified organization. That period must be at
least nine months but not more than 26 months from the date of the
deed of conveyance of the propersy 5o the land bank.
(e) During the specified period, the land bank may no5 sell
the propersy to a qualified participating developer other than a
qualified organization. If all qualified organizations notify the
land bank that they are declining 5o exercise their right of first
refusal during the specified period, or if an offer 5o purchase the
property is no5 received from a qualified organization during that
period, the land bank may sell the property 5o any other qualified
participating developer a5 the same price that the land bank
offered the property to the qualified organizations.
(f) In its plan, the municipality shall establish the amoun~
of additional time, if any, that a property may be held in the land
bank once an offer has been received and accepted from a qualified
organization or other qualified participating developer.
(g) If more than one qualified organization expresses an
interest in exercising its right of first refusal, the organization
that has designated the most geographically compact area
encompassing a portion of the property shall be given priority.
(h) In its plan, the municipality may provide for other
rights of first refusal for any other nonprofit corporation
exempted from federal income max under Section 501(c) (3), Internal
Revenue Code of 1986, as amended, provided that the preeminent
right of first refusal is provided to qualified organizations as
provided by this section.
(i) The land bank ms noE required 5o provide a right of first
refusal to qualified organizations under this section if the land
bank is selling properEy that reverted Eo the land bank under
Section 379C.009(d).
Added by Acts 2003, 78th Leg., ch. 299, § 1, eff. Seps. 1, 2003.
§ 379C.012. OPEN RECORDS AND MEETINGS. The land bank
shall comply with the requirements of Chapsers 551 and 552,
Government Code.
Added by Acts 2003, 78th Leg., ch. 299, § 1, eff. Sept. 1, 2003.
§ 379C.013. RECORDS; AUDIT; REPORT. (a) The land
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LOCAL GOVERNMENT CODE - CHAPTER 379C Page 8 of 9
bank shall keep accurare minutes of its meetings and shall keep
accurate records and books of accoun5 that conform with generally
accepted principles of accounting and that clearly reflect the
income and expenses of the land bank and all transactions in
relation to its properry.
(b) The land bank shall file with the municipality no5 later
than the 90th day after the close of the fiscal year annual audited
financial statements prepared by a certified public accountant.
The financial 5ransa~tions of the land bank are subject to audit by
the municipality.
(c) For purposes of evaluarlng the effectiveness of the
program, the land bank shall submit an annual performance report 5o
the municipality no5 later than November 1 of each year in which the
land bank acquires or sells proper~y under this chapter. The
performance repot5 muse include:
(1) a complete and detailed wrlrten accounting of all
money and properties received and disbursed by the land bank during
the preceding fiscal year;
(2) for each proper~y acquired by the land bank during
the preceding fiscal year:
(A) the srree5 address of the properry;
(B) the legal description of the property;
(C) the date the land bank took title ~o the
property;
(D) the name and address of the properry owner of
record at the time of the foreclosure;
(E) the amoun~ of ~axes and other cosrs owed a~
the time of the foreclosure; and
(F) the assessed value of the properry on the lax
roll at the time of the foreclosure;
(3) for each property sold by the land bank during the
preceding fiscal year to a qualified participating developer:
(A) the sEreet address of the proper~y;
(B) the legal description of the property;
(C) the name and mailing address of the
developer;
(D) the purchase price paid by the developer;
(E) the maximum incomes allowed for the
households by the terms of the sale; and
(F) the source and amount of any public subsidy
provided by the municipality to facilitate the sale or rental of the
property to a household within the targeted income levels;
(4) for each property sold by a qualified
participating developer during the preceding fiscal year, the
buyer's household income and a description of all use and sale
restrictions; and
(5) for each property developed for rental housing
with an active deed restriction, a copy of the most recent annual
report filed by the owner with the land bank.
(d) The land bank shall maintain in its records for
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LOCAL GOVERNMENT CODE - CHAPTER 379C Page 9 of 9
inspection a copy of the sale settlement statement for each
property sold by a qualified participating developer and a copy of
the first page of the mortgage note with the interest rate and
indicating the volume and page number of the instruraent as filed
with the county clerk.
(e) The land bank shall provide copies of the performance
report to the taxing units who were parties to the judgment of
foreclosure and shall provide notice of the availability of the
performance report for review to the organizations and neighborhood
associations identified by the municipality as serving the
neighborhoods in which properties sold Eo the land bank under this
chapter are located.
(f) The land bank and the municipality shall maintain copies
of the performance report available for public review.
Added by Acts 2003, 7$th Leg., ch. 299, § 1, eff. SepE. 1, 2003.
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