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Tax Lien Auction Must Be Eliminated, AG Urges Mayor Bill de Blasio and City Council

Attorney General Letitia James is urging the mayor and City Council to reform the city’s annual Tax Lien sale
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Brooklyn house sales are booming. Photo: Google Maps

New York Attorney General Letitia James has called on Mayor Bill de Blasio and City Council Speaker Corey Johnson to reform tax lien sale from a process that "tears down neighborhoods to one that builds them up."

On Monday, James sent a letter to de Blasio and Johnson urging the city to reform the legislation, that expires Dec. 31, so it can use community land trusts and land banks for delinquent properties, ensuring residents could stay in their homes.

"In the new year, we will have an opportunity to transform the tax lien sale from a process that tears down neighborhoods to one that builds them up," James said.

Attorney General Letitia James. Photo: Matt Cohen for Flickr

"With a few key changes to the way we approach tax liens, we are able to create a system that keeps homeowners in their homes, and stabilizes neighborhoods, all while continuing to allow the city to collect tax revenue."

Every year, the New York City Department of Finance holds a tax lien sale, where the tax liens on properties for unpaid property taxes and water bills are sold off in an auction.

James said the terms imposed by the tax lien sale on New Yorkers were dramatic, including mandatory 5% surcharges, legal fees and a nine or 18% interest rate that compounds daily.

She said the additional fees could quickly turn a relatively small tax lien into an overwhelming financial burden, eventually pushing homeowners into foreclosure. By using community land trusts and land banks instead of an auction, residents could remain in their homes and properties would be permanently secured as community assets, she said.

This year, Governor Andrew Cuomo halted the tax lien sale through the end of the year after 58 local, state and federal leaders urged the delay. In a letter, the group called for the removal of more than 4,700 Class 1 Properties, or residential buildings with three or fewer units, from the tax lien sale.

In this letter, James urges the city to eliminate water and sewer lien sales for low- and middle-income homeowners of one-to-three family homes; create a "Homeowner Advocate" position who would help homeowners navigate different agencies involved in the tax lien sale; and exclude non-profits and houses of worship from both the water and the property tax lien sale.