Wednesday, May 26, 2010

Louisville-Area Tax Lien Investors Accused Of Squeezing Delinquent Owners w/ Bogus Legal Fees When Redeeming Homes; Suit Seeks Class Action Status

In Jefferson County, Kentucky, The Louisville Courier Journal reports:
  • Companies that buy delinquent property tax bills are charging unnecessary, exorbitant and illegal legal fees to owners who want to reclaim their property -- and preying on the elderly and unsophisticated, according to a lawsuit filed in Jefferson Circuit Court.

  • The suit, filed earlier this month on behalf of an 86-year-old woman and two other plaintiffs, says that charging attorneys' fees, often within a year after the sales, is both unlawful and unethical.

  • Under Kentucky law, private companies can buy delinquent bills and charge derelict owners 12 percent a year until they pay the debt. If the owners still don't pay after one year, the company can start foreclosure proceedings against the property and add interest and attorney fees. But the law says that no action may be brought to initiate the foreclosure until one year after the property is certified delinquent.

  • The lawsuit alleges that the Jamos Fund I LP, of Fort Thomas, Ky., is violating that stipulation by tacking on exorbitant legal fees before the year expires, merely for sending notices to taxpayers that their bills have been purchased. In an interview, James Ballinger, one of the lawyers for the plaintiffs, said other companies, including some owned by lawyers, are doing the same.

  • Cindy Lanham, a spokeswoman for the Kentucky Finance and Administration Cabinet, which is not involved in the suit, said it believes that attorneys' fees can be charged during that period, but Ballinger said he believes the courts will look askance at such fees if they aren't earned. He said that the suit is the first of its kind filed in Kentucky and that the state's courts have never decided whether pre-litigation expenses can be charged during the year after a tax certificate is purchased.(1)

For more, see Companies that purchase late tax bills sued (Fees are illegal, local plaintiffs say).

(1) The complaint asks that the suit be declared a class action on behalf of everyone who has paid what are described as "outrageous fees" to the Jamos Fund I and attorneys Steven Roland Smith and Greg Dewey Voss.