• Tax Appeal and Tax Lien Foreclosure Intersect -- Again
  • February 14, 2013 | Author: Gregory F. Servodidio
  • Law Firm: Pullman & Comley, LLC - Hartford Office
  • Ross & Roberts, Inc. owned a commercial parcel of real estate in Stratford but failed to pay real estate property taxes assessed on the Town’s October 1, 2008 and 2009 Grand Lists. Together with applicable penalties, these taxes reached a total of almost $161,000 at the end of 2010. Apparently, the company took the position that the building portion of the assessment was improper because approximately 70% of the structure had been demolished prior to October 1, 2009.

    However, not surprisingly, the Town of Stratford, being most interested in collecting tax revenue, filed a tax lien foreclosure action on February 8, 2011. The owner’s response, in part, was that the levy was improper for the reasons stated above.

    Is a defense based on an improper assessment acceptable in a tax lien foreclosure case? Other Connecticut courts have held that it is not. What distinguished the owner’s position here from prior decisions was that it had filed a tax appeal against the two assessments which were the basis of Stratford’s foreclosure action and which were pending when the foreclosure commenced.

    Hold on, the Town argued. There is a specific provision in Connecticut’s tax appeal statute which states: “The pendency of [a tax appeal] shall not suspend an action by such town or city to collect not more than . . . 90% of such tax with respect to any real property . . . upon which such appeal is taken. Stratford argued, understandably, that a tax lien foreclosure action fell within the provisions of this rule. A Superior Court rejected this claim. The statutory prohibition referred to by the Town applies only to an action to collect the taxes due - not to foreclose a tax lien. It would be inequitable, Judge Sybil V. Richards ruled, to allow the foreclosure to proceed. Courts strive to achieve fairness in foreclosure actions. The special defense filed by the owner was allowed to remain in the case.

    This ruling is problematic and requires definitive examination by the Connecticut Supreme Court. On the one hand, while it could be said that the Town of Stratford jumped the gun by commencing a foreclosure action,the refusal of property owners to pay any portion of taxes due, not to mention the minimum statutory 90% mentioned earlier, during the pendency of a tax appeal could impose serious financial hardship on Connecticut municipalities. Withholding any payment with at least temporary immunity from a tax lien foreclosure action could enable unscrupulous property owners to achieve advantageous tax appeal settlements against cash-starved towns.

    On the other hand, the fact that courts commonly award very little judgment interest on tax refunds might motivate property owners to withhold tax payments, a large portion of which they expect to be refunded. Not mentioned in Judge Richards’s opinion is the staggering interest cost assumed by a property owner in deciding to withhold any tax dollars - currently payable at 18% annually.

    Town of Stratford v. Ross & Roberts, Inc., Docket No. CV-11-6016716, Superior Court Judicial District of Fairfield (August 9, 2012).