D.C. Officials Agree To Settle Class Action Suit Accusing It Of Using Often-Abused Tax Lien Collection System That Allowed Investors To Use Inflated Fee Racket To Unconstitutionally Strip Homeowners Out Of The Equity In Their Homes Over Small Tax Debts
- The District government has agreed to pay about $1 million to settle a federal class-action lawsuit brought by homeowners to stop tax-lien investors from taking homes in the city through foreclosure, attorneys for both sides said.
In a proposed settlement made public in court , the District agreed to pay up to 65 percent of a property’s assessed value to homeowners or surviving relatives whose residences were taken by an often-abusive tax-collection system in which even small tax debts triggered property sales, said class attorney Bill Isaacson of the Boies, Schiller & Flexner law firm.
The agreement calls for average payments of tens of thousands of dollars each to 21 known class members, 13 of whom have been found, Isaacson said, including lead plaintiff Bennie Coleman, an 81-year-old veteran who lost his home over a $134 bill. Owners of blighted properties who did not reside in the homes that were sold would receive 35 percent of assessed value.
***The lawsuit was brought after a 2013 Washington Post investigation identified problems in a city program that imposed liens on properties when homeowners failed to pay their tax bills.(1) The liens then were sold at public auctions to private investors who drew a profit by charging owners interest on top of the tax debt until the money was repaid.
The Post found that some investors also demanded thousands in fees from homeowners that far exceeded the owner’s original tax debts and then took homes when owners couldn’t pay. About 500 properties were lost since 2005, The Post found, most in the city’s poorest neighborhoods and about one-third from owners who owed less than $1,000.
“It was tough on my mother and our family when she lost her home . . . but we are pleased to get this settlement to help others in the same situation,” Wendell Robinson, son of Jean Robinson, whose estate is a plaintiff, said in a statement.
Robert Bunn, the court-appointed conservator and guardian for Coleman, said the settlement “will help him and others live out their lives in peace. We’re also grateful that the D.C. Council took action to make sure that this injustice does not happen again.”
Coleman stands to receive $70,000 to $125,000 from the settlement, based on his home’s $197,000 value and proposed sliding scale set by the agreement.
Isaacson, working pro bono, said it was an unconstitutional abuse of power for the government to allow investors to strip owners of all of the equity in their homes over small tax debts, particularly owners incapable of caring for themselves, such as Coleman, who has severe dementia.
For earlier posts on this story, see:
- Washington Post To D.C. City Council: You Did Wrong! Now Do Right & Quit Fighting Class Action Lawsuit & Compensate Ex-Homeowners Who Got Screwed Out Of Their Home Equity By Your Abusive Tax Lien System;
- Federal Court Green-Lights Elderly, Dementia-Stricken Veteran's Lawsuit Accusing D.C. Of Violating His 5th Amendment Rights By Swiping His $200K Free & Clear Home Over Unpaid $134 Tax Debt & Refusing To Fork Over The Proceeds For His Surplus Home Equity From Tax Sale;
- DC's Past Abusive Use Of Tax Foreclosures To Snatch Poor Homeowners' Home Equity, Pocketing Surplus Proceeds From Sale, Failing To Pay Just Compensation In Apparent Violation Of Fifth Amendment At Issue In Current Litigation.