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Vacant Property is Irredeemable after Sheriff Sale, Commonwealth Court Rules

If one wishes to take advantage of his right to redeem a piece of real estate subsequent to a sheriff’s sale, it is critical to act in a timely manner, otherwise one may miss the opportunity to do so.

53 P.S. Section 7293 lays out the time line to take action in redeeming a property; however, there was some ambiguity in precisely interpreting just when the deadlines occur. The Court, in the recent matter, and case of first impression, Brentwood Borough School District v. HSBC Bank USA, 111 A.3d 807, helped clarify some of the aforesaid ambiguity.

In Brentwood, Defendant HSBC is the mortgagee on a property which was sold at sheriff’s sale to a third party called Grove Properties, Inc. due to delinquent taxes. Within about five months, HSBC filed to redeem the property pursuant to 53 P.S. Section 7293(a). According to 53 P.S. Section 7293(a), a party must file to redeem a property within nine months from the date of the acknowledgment of the Sheriff’s Deed which conveys a property following a sheriff’s sale.  The trial court ruled against HSBC on this issue, asserting that HSBC only had ninety days to file to redeem, however on appeal the Commonwealth Court realized the trial court mistakenly applied the time line laid out in 53 P.S. Sections 27101-27605, and reversed the ruling of the trial court and confirmed the nine month time period.

The primary issue the Court focused upon was whether the property was vacant pursuant to 53 P.S. Section 7293(c), which made the case one of first impression. Section 7293(c) states that “there shall be no right of redemption of vacant property by any person after the date of the acknowledgment of the sheriff’s deed therefor.” Defendant argued that the property was not vacant because the occupant of the property at issue only temporarily stayed at her friends’ house to save money. She also left her belongings at the subject property. Based on the above, the Defendant asserted that, at most, the occupant of the property was only temporarily absent from it, which does not constitute its vacancy, as a property cannot be vacant if its occupant intends to return. In support of its argument, Defendant cited to how the term “occupied” is used in other cases and statutes.

The Court ruled that the term “occupied” must first be interpreted in the context of the Municipal Claims and Tax Liens statute (i.e.: 53 P.S. Section 7101 et seq). Pursuant to that statute the occupancy must be as a residence and not as a storage unit. Per the Court, the purpose of the statute is to increase the collection of taxes and to free land to bear its share of the tax burden. As a result, the Court reasoned, the statute must be interpreted to take consideration of the ability of the municipality to convert a house sold at sheriff’s sale back to productive use as quickly as possible.  Therefore, the Court deduced that the legislature intended the redemption period should be brief which, in this case, is nine months’ time.

The Court observed that “occupied” is a factual determination to be made and applied on a case-by-case basis. The factors to consider in looking at a case include: “whether anyone was habitually physically present at the property, i.e., regularly sleeping and eating there and using it as a place to dwell; whether any lack of physical presence was due to temporary illness, travel or renovation; whether the property was unsecured, damaged or uninhabitable; and whether the basic and necessary utilities such as water, electric and gas were operational.” The instant matter revealed a property which had no person habitually present in it before the sale. It had no running hot water or gas and, therefore, no means to bathe or cook, essentially making it uninhabitable.  Further, it also revealed that the occupant simply could not afford to reside at the property any longer. As a result, the Court resolved that the property was unoccupied. As the property was unoccupied, Defendant could not redeem the property after the date of the acknowledgment of the sheriff’s deed under the statute.

In light of the above, Defendant argued that disallowing them from redeeming the property was unjust as it “could not reasonably be deemed to be on notice that while [the occupant] kept all her belongings at the Property and frequently returned to the Property that she would later claim that she did not reside there anymore, and Defendant would suddenly be precluded from redeeming its interest in the Property.” The Court was not convinced. The Court was satisfied that the Defendant received all required statutory notices under the applicable law.

In sum, the Court ruled that the statute at issue is designed for a speedy and efficient process to return a property sold at sheriff’s sale to productive use and a property with no working utilities and no one physically inhabiting the property is vacant (or unoccupied) despite the occupant’s intention to move back in or leaving her belongings in the property.

Originally published on October 3, 2017 in Upon Further Review and can be viewed here.

Proof of Mailing Not Very Taxing

The Supreme Court of Pennsylvania clarified the interpretation of the statutory notice requirements for tax sales in the matter of Horton v. Washington County, 81 A.3d 883 (2013). The underlying claim involved Plaintiffs’ not having paid real estate taxes for the Property for the years 2007 and 2008 to Washington County’s Tax Claim Bureau (“Bureau”). Due to the delinquent taxes, the Bureau pursued and perfected a tax sale of the Property.

Specifically, the Court analyzed 72 P.S. Section 5860.602(e) and the statutory phrase “proof of mailing” in order to provide guidance as to how notice of a tax sale is to be provided to the interested parties.

The Plaintiffs in the matter owned real estate in Pennsylvania (“Property”) from which they operated an insurance business while they resided in Florida. Plaintiffs did not use the Property as a mailing address. Furthermore, the deed to the Property contained errors, namely the Plaintiffs’ names were misspelled and it indicated that the Property was a residence as opposed to a business. Significantly, the Bureau was never provided with correct information about Plaintiffs’ actual residence.

Before conducting the above-mentioned tax sale, the Bureau made a variety of efforts to locate and notify the Plaintiffs of the tax sale. The Bureau’s efforts included: mailing a courtesy letter to the Property in April 2008 (which was returned by the United States Postal Service (“USPS”) as “no such number”); mailing a pre-sale warning letter to the Property in May 2009 (returned by the USPS as “return to sender – attempted – not known – unable to forward”); mailing a certified letter with restricted delivery to the Property (returned by the USPS as “not deliverable as addressed – unable to forward”) in July 2009; posting the Property later in July 2009 (personal service was not perfected and there was no answer at the Property); in August 2009 placing a notice in three (3) local newspapers for the tax sale; and, later in August 2009, sending an additional final notice of the sale to the Property (returned as “not deliverable as addressed – unable to forward”). The sale took place in September 2009 and by October 2009 the Bureau mailed several post-sale notices to Plaintiffs at the Property via certified mail (all were returned as not deliverable).

Based on the above, a tax sale of the Property occurred and was perfected; Plaintiffs subsequently filed a petition to set aside the tax sale. At the trial of this matter, Plaintiffs testified that they never received any tax bill, any notice of tax delinquency, or any notice of the tax sale; they also admitted that the Bureau was not responsible for any of the errors on the Deed to the Property and conceded that the errors would make it difficult for the Bureau to locate them. Plaintiffs also argued that the Bureau did not exercise reasonable efforts to investigate their whereabouts. The trial court granted Plaintiffs’ petition to set aside the tax sale. Specifically, the trial court ruled that Bureau did not provide a “proof of mailing” of notice of the sale to Plaintiffs. The Bureau appealed to the Commonwealth Court which upheld the decision of the trial court, ruling that a “proof of mailing” can only be satisfied with a USPS Certificate of Mailing (Form 3817). The Bureau then appealed to the Pennsylvania Supreme Court.

On appeal to the Pennsylvania Supreme Court, the only issue to be decided was whether Plaintiffs were provided sufficient notice under the applicable statute. The Court noted that Pennsylvania precedent requires the Bureau to strictly comply with the statute’s notice provisions in order to ensure Plaintiffs received due process of law before being deprived of Property. The case turned on an interpretation of 72 P.S. Section 5860.602(2)’s language requiring a “proof of mailing.”

When determining how to interpret the term “proof of mailing” the Court looked to legislative intent and other parts of the same statute. The Court found it significant that multiple official USPS mailing terms are used in the relevant statute, but the term “proof of mailing” is not a USPS term for a specific service. As a result, the Court could not conclude that the term “proof of mailing” referred to a specific USPS service or form.

The Court noted that, as described above, the Bureau did send correspondence and other notices to the Property and provided USPS documents as proof that those mailings did, indeed, occur (albeit they were returned); therefore, the Court ruled, the Bureau did provide the proof of mailing as required by the statute. As a result, the Court remanded the matter back to the trial court for consideration of the other issues raised by Plaintiffs in view of the Court’s ruling that they received adequate notice.

In ruling as it did, as described above, the Court overruled prior cases and specifically confirmed that, as far as notice for tax sales are concerned, “proof of mailing” merely means providing documentary proof of mailed correspondence and does not refer to a specific USPS service or form.

Originally published in Upon Further Review on August 18, 2014 and can be seen here.

Real Estate Disputes Between Church and Parish

Over the last several years, there have been a number of cases involving the Episcopal Church and/or its dioceses and/or its parishes and disputes over ownership of church property. Specifically, as the Episcopal Church as a whole has become more theologically/doctrinally progressive, various parishes and dioceses that espouse a more conservative view have been breaking off from it and, sometimes, attempting to take their real estate with them.

There have been some local disputes in the Episcopal Church in the Montgomery County Court of Common Pleas (e.g.: Moyer v. Bennison, Case No.: 2002-07147; Moyer v. Bennison, Case No.: 2002-16553; In re the Church of the Good Shepard Rosemont, Pennsylvania, Case No.: 09-0609) regarding the property and employment dispute between the parish of Good Shepherd in Rosemont, Pa., and its priest, Father David Moyer, against the Episcopal Diocese of Pennsylvania, and in Philadelphia Court of Common Pleas regarding the property of the Church of Saint James the Less (e.g.: In re Church of Saint James the Less, 585 Pa. 428 (2005). In these matters, the court ruled in favor of the diocese under the long-standing precedent that property of a parish is ultimately owned by the hierarchical church.

Two of these recent property disputes between parishes and their dioceses have finally reached the U.S. Supreme Court, one from Georgia and another from Connecticut. The matter from Connecticut (Episcopal Church v. Gauss, Case No.: UWY-CV08-4020456-S, in Waterbury, New Haven County Court) is an interesting one, as it involves the parish of Bishop Seabury Anglican Church, which was formed before the establishment of the Episcopal Church itself. Its argument was essentially that, as it was formed before the existence of the Episcopal Church, voluntarily entered the Episcopal Church and never received contributions from either its local diocese or the national Episcopal Church, it should own the real estate the parish uses. Therefore, due to its virtual independence, it argued that it should remain independent and free to disaffiliate with its property in tow. The Connecticut courts, like the Pennsylvania court above, ruled against the parish, holding that the parish is owned by the diocese. The parish appealed to the U.S. Supreme Court and, in early June 2012, the Supreme Court declined to hear the case, cementing the lower court’s decision that Bishop Seabury Anglican Church does not own its property and cannot take it when it separates from its diocese and the Episcopal Church.

The type of litigation described above has unique circumstances elevating the dispute beyond the parish and diocese in a matter involving the Episcopal Diocese of Pittsburgh. As opposed to individual parishes seeking to disaffiliate from the Diocese of Pittsburgh, the diocese itself is seeking to separate from the Episcopal Church. Although there is significant precedent as to the relationship of a parish’s property to its diocese, the question of the relationship of a diocese’s property to the national Episcopal Church is generally a matter of first impression. As the Diocese of Pittsburgh and other dioceses (e.g.: the Diocese of San Joaquin, Calif., and the Diocese of Fort Worth, Texas) weigh their litigation options, it is clear that this area of the law is developing rapidly and it will be interesting how the courts will ultimately resolve these property disputes.

Originally published in The Legal Intelligencer Blog and can be found here.

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