Tax bills mount when deeds aren’t transfered

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There’s a man who has been calling Judy Hardwicke, a deputy at the El Paso County Treasurer’s Office, for months asking why he keeps getting the tax bill for a property he lost in foreclosure more than a year ago.

“I’ve been watching it since February,” Hardwicke said. “The foreclosure sale was in March, 2010.”

She’s not sure what to tell him. The deed is still in his name.

It’s not common, county officials say, but it does happen that an investor or a bank that acquires a property through foreclosure never goes to the El Paso County Public Assessor’s office to request a deed transfer.

If the new owner never asks for a deed, the property will still be under the previous owner’s name on the county assessor’s books.

“And there’s no reason the previous owner would pay taxes on property he no longer owns,” said El Paso County Public Trustee Tom Mowle.

That means the taxes become delinquent and start building up interest and penalties.

A tax lien in Colorado is superior to all other liens and never goes away regardless of bankruptcy, foreclosure or property sales or transfers.

It stays with the property and eventually someone must pay it or the property can be turned over to the lien holder.

This year’s unpaid property taxes officially became delinquent on June 16 and tax liens against the properties will be sold in a public auction Oct. 18 and 19.

The lien holder is eligible to apply for a tax deed four months before the third anniversary of the tax sale. If no one comes forward to pay the back taxes for the property owner, the investor who purchased the tax lien can take possession of the property.

Even though it’s not common for property deeds to go unclaimed, it does happen and can be a headache for those who find themselves in the situation.

Of the 364 properties that entered into the foreclosure process in January of 2010, 166 had sold or been turned over to the lending institutions as of July 1. But only 140 had been deeded to new owners. That means more than 18 percent, or 26 of the properties that went into foreclosure a year and a half ago and have since sold at auction are still under their previous owners’ names.

“Of course, some of those properties could have just sold this week,” Mowle said.

He speculated that some of the undeeded properties could belong to banks that will ultimately turn them over to the U.S. Department of Housing and Urban Development, or HUD.

The banks that took possession of those properties wouldn’t want to pay for a deed transfer if they were just going to turn them over to HUD, Mowle said. But they would likely keep up on tax payments because HUD requires homes to be ready to sell when it takes them over, which means there should be no liens.

In other cases, investors might wait until they are ready to sell a property to request a deed transfer. Or sometimes they may just not realize they’re required to request the deed, Mowle said.

Tracking the issue is difficult because county offices do not interact.

The treasurer’s office does not receive any information about foreclosures from the trustee’s office, Hardwicke said. And Mowle said his office doesn’t have access to information about tax delinquencies.

Gina Trivelli, who works at the treasurer’s office, said she’s surprised banks don’t require homeowners in Colorado to roll their property taxes into escrow so the bank can protect its interests in the event the property owner doesn’t pay his taxes.

“I used to work at a title company and one thing is for sure — if you’re not paying your mortgage, you’re not paying your taxes either,” Trivelli said.

That certainly looks to be true. There were 4,166 tax liens sold in 2009, the same year foreclosures peaked. There were just 2,670 in 2010.

Dealing with the tax record can be a nightmare for the previous property owners, Mowle said, because they might be trying to restart the clock in order to buy property again. It typically takes three years for a foreclosure to come off of a potential homebuyer’s financial record.

“But if no one requests the deed, the property just sits there on the books under the old owner’s name,” Mowle said.