WORCESTER – The federal, state, and local governments frequently use a tax lien to collect unpaid taxes. A tax lien is a legal claim on the property of the delinquent taxpayer to collect unpaid taxes. Until the debt is paid, an asset with a tax lien can’t be sold.
Municipalities will frequently place a tax lien on the title of the home of a taxpayer who owes property taxes. The debt owed on a tax title lien can lead to foreclosure and eviction through a legal process. In Massachusetts, the Housing Court Department of the judiciary presides over these cases.
For more than a century, Massachusetts law has enabled municipalities to keep the full amount of the sale of a property after a foreclosure, not only the debt owed. This means any equity built by the homeowner is lost.
For example, if a municipality foreclosed on a home for a tax debt of $40,000, then sold that home for $250,000, the law enabled that municipality to keep the full $250,000, not only the $40,000 of tax debt owed. In this scenario, the homeowner would lose $210,000 in equity over a $40,000 tax debt.
This practice became known as “equity theft.”
A 2017 study estimated that $56 million in equity was appropriated from Massachusetts taxpayers annually through the equity retained over the amount of debt owed to lien holders who foreclosed on properties.
Frequently, the proceeds of “equity theft” are not retained by municipalities.
Rather than go through a lengthy foreclosure and eviction process, municipalities often sell the rights to those liens at auction to private buyers. These auctions enable municipalities to receive the amount of tax owed without a lengthy legal process.
Private buyers who purchase that debt have the same rights to retain the full amount of a home sale after a foreclosure and eviction.
William P. Cowin and Tallage
A series of independent Limited Liability Companies (LLC), each with the word Tallage in the company name, frequently purchases the rights to tax title liens at auctions held by Massachusetts municipalities.
According to the Massachusetts Secretary of State Corporation Division’s database, there are seven LLCs registered in Massachusetts with the word Tallage in its name. Three of the seven, Tallage Davis, LLC, Tallage Lincoln, LLC, and Tallage Brooks, LLC, are currently active.
All seven LLCs list a single manager, William Phillip Cowin. All seven also list their address at 305 Tremont St., Suite 305, in Boston.
The GrandView on Tremont sits at 205 Tremont St. The 18-story building has residential luxury condominiums overlooking Boston Common and the Charles River.
According to Zillow, Unit 305 is a 658 square foot unit with one-bedroom and one-bathroom, and an estimated market value of $588,600.
The Tallage website currently says it is under construction. In January 2023, the New Bedford Light reported that the Tallage website said Cowin is a graduate of the Warton School at the University of Pennsylvania. Before founding Tallage, LLC in 2010, Cowin helped underwrite and close over $1 billion in investments with the real estate division of Fidelity Investments.
Tallage, LLC, became inactive in 2015.
According to Merriam-Webster, the word tallage was first used in during 14th century feudalism. Its definition is “an impost or due levied by a lord upon his tenants.”
How Tallage Increases Homeowner Debt
When a private buyer purchases a tax title lien, that buyer becomes the taxpayer of record.
Under state law, that buyer has no obligation to notify the owner of the property it purchased a lien.
Many municipalities charge an interest rate on debt owed below the 16 percent allowed by state law (Worcester charges 14 percent). Once Tallage acquires the debt, 16 percent interest begins accruing. In many cases, Tallage waits years before notifying the homeowner.
During that time, Tallage pays all property taxes due, increasing the principle and the amount of interest accrued. In short, they run up the tab while homeowners are no longer being sent tax bills.
Equity Theft in Worcester
A study by the Pacific Legal Foundation found that 31 Massachusetts municipalities, which are home to a third of the state’s population, sold 254 tax-foreclosed homes between January 2014 and December 2020.
The study found that the average homeowner lost roughly $260,000 in equity, around 87 percent, for an average tax debt of $36,000.
During the same period, researchers found two homes sold by the City of Worcester with tax liens. The city retained $139,742 more than the taxes owed on those properties.
Tallage sold 21 homes for which it purchased tax liens during the same period. It sold those homes for $1.75 million more than it paid the city for the purchase of those liens.
Of the 31 municipalities included in the Pacific Legal Foundation study, 11 did not sell any tax-foreclosed homes.
The City of Worcester auctioned tax title liens in 2019, 2022, and 2023. The city did not conduct auctions in 2020 and 2021, during the pandemic. During those three years, the city sold 388 tax liens at auction.
See the full list of properties with tax liens auctioned by the city during those three years, and the buyers, at the bottom of this page.
According to a representative of City Manager Eric Batista’s office, the City of Worcester will not hold a tax title lien auction in 2024.
Tatman Street
In July 2023, the Worcester Telegram and Gazette reported that Tallage Brooks, LLC, had won a foreclosure on Nancy Rodriguez’s Tatman Street home before she was aware a tax lien existed.
Records from the Worcester Registry of Deeds show that Tallage bought the lien on the property from the City of Worcester for $3,370 in June 2019. Documents show that at the time Tallage purchased the lien, the resident owed $2,656 in fiscal year 2018 taxes. The home was assessed at $291,500.
Rodriguez purchase the home in 1996 and paid off her mortgage in 2020.
Rodriguez filed for bankruptcy in January 2023. She also filed lawsuits against Tallage Davis LLC and the City of Worcester.
By February 27, 2024, all three cases were terminated. According to public records available through the Worcester Registry of Deeds, the homeowner signed a mortgage on Feb. 29, 2024 for over $42,000.
The mortgage holder: Tallage Davis, LLC.
Tallage holds only three mortgages in Worcester County, according to public records. The other two, executed in 2014 and 2016, were both with businesses.
An attorney for Rodriguez declined to comment on how the cases were resolved.
Sears Island Drive
This Week in Worcester previously reported that Homes Wilson, owner of a property on Sears Island Drive, received a letter in September 2023 from an attorney representing Tallage Brooks, LLC.
The letter said the tax collector’s deed “vests title of your property in Tallage, subject to your right to redeem the property by paying all the outstanding taxes, interest, legal fees, and costs.”
This Week in Worcester obtained the notifications of delinquent tax payments mailed by the city to the homeowner through a public records request.
Each notification listed a post office box to which the homeowner no longer subscribed. The United States Postal Service policy is to return undeliverable mail to the sender.
According to a City of Worcester spokesperson, the city also hand delivers a warrant to the property. The property owner said he never received any hand-delivered notice from the city at the property.
The city is not required to retain documentation of proof of delivery of these notifications.
“When my lawn was messy, the guy from the city looked up my mobile phone number in their computer and called me personally, or city inspectors will just knock on your door about a problem with building code,” Holmes told This Week in Worcester last year.
For delinquent taxes, the first notification Wilson says he received was through an attorney for Tallage.
A Powerless City Council’s Efforts
Worcester City Councilors have long sought information on tax title liens, with little to show for it.
On November 1, 2011, then-Councilor Joseph O’Brien sought clarification of the city’s policy concerning the selling of tax title liens. Then Councilor, now Mayor Joe Petty, also sought a report on property tax liabilities prior to the city ordinance that allowed selling tax title liens and current liabilities.
On April 24, 2012, a report transmitted to city council from the Treasury and Collections Division outlined the city’s notification procedures for tax title liens, but did not include any information on property tax liabilities.
On Jan. 26, 2016, a citizen petition by William Coleman III requested the city administration help homeowners over the age of 65 years who are in tax title default to keep their homes. The petition was referred to the city manager.
On April 11, 2023, Councilor George Russell’s order, unanimously approved by all 11 councilors, requested the city manager draft a policy to adjust tax title options in a way that would prevent property owners from losing their properties due to owing taxes on a small portion of their equity.
It does not appear that the requested policy was ever transmitted to the city council.
The City of Worcester held a tax title lien auction less than two months later, on June 7, 2023. The city successfully auctioned tax title liens to 165 properties. Buyers paid under $100 each for liens on six properties.
The auction took place 13 days after the US Supreme Court ruled that “equity theft” is unconstitutional.
On August 22, 2023, an order by Mayor Petty and Councilor Russell requested the city manager immediately halt tax title sales on occupied residential properties.
Another order by Councilor Maurice Bergman and Councilor Candy Mero-Carlson sought a legal opinion on how the US Supreme Court case applies to Worcester. A third order by Councilor King requested a report from the administration on its policies and other data related to tax title lien auctions.
It does not appear the council was provided with either report.
On September 12, 2023, Councilor King requested a report from the city administration on a repayment plan for tax title liens. King also asked for the city manager to review other municipalities and determine if a repayment plan for tax title liens could be established.
It does not appear this report was provided to the city council.
In Worcester’s governmental system, the elected city council has no power to require the city manager to take an action. Its only implicit power is to fire the city manager.
Federal and State Courts Intervene
In May 2023, the US Supreme Court unanimously ruled that “equity theft” violates the Takings Clause of the Constitution. The case, Tyler v. Hennepin County, originated in Hennepin County, Minnesota.
The Massachusetts Legislature, ranked the least efficient in the country in a study last year, has not passed legislation to bring state law into compliance with the Supreme Court ruling.
Instead, on Friday, April 19, Hampden County Superior Court Judge Michael Callan finally put an end to the practice.
Callan ruled that municipalities in Massachusetts cannot keep funds over taxes owed when it forecloses on a delinquent taxpayer. Callan wrote that the practice is unconstitutional and “requires a legislative correction” in state law.
Massachusetts Legislature Considering Legislation
At the State House, the legislature has taken up bills in the past on “equity theft”, but failed to pass one into law. After Judge Callan’s ruling in April, a bill is making progress.
On May 13, 2024, the Joint Committee on Revenue referred a bill to the House Ways and Means Committee with a recommendation it ought to pass. The bill intends to limit, but not eliminate, “equity theft.”
The bill, “An Act relative to municipal tax lien procedures and protections for property owners in the Commonwealth,” is H.4624.
If passed by the legislature and signed into law by the governor, the bill would establish the term “excess equity” in Massachusetts law. The bill defines the term as any remaining surplus amount over taxes, interests, fees, judgements, and other charges related to the sale of a home by a lien holder.
In H.4624, section 2 requires that, “A purchaser owning any tax receivable shall give notice to a taxpayer, and to the appropriate municipality, within 12 business days of purchasing said tax receivable.” The homeowner knowing about the lien within 12 days would prohibit lien purchasers from waiting as the homeowner accumulates additional debt.
The bill also requires these notifications to be prepared by the Department of Revenue, and would require a standard format with certain information such as unpaid costs, information on rights to redeem the property, and other information.
While the legislation improves the process, it does not eliminate equity theft. A homeowner has 18 months from the time of the sale of the property to present claims for excess equity. After 18 months, should the excess equity remain unclaimed, the company that purchased the lien would be able to retain all funds from the sale of the home, including excess equity.
Advocates Seek Changes to Legislation
Representatives of the National Consumer Law Center, Greater Boston Legal Services, the Massachusetts Association of Realtors, and Pioneer Public Interest Law Center sent a joint letter to the Joint Committee on Rules in the Massachusetts Legislature on Monday, May 14, advocating for four changes to H.4624.
Fully Eliminate Unclaimed Equity Retention
The joint letter argues that enabling lien holders to retain excess equity after 18 months raises the same legal issues which both the US Supreme Court and Massachusetts Superior Court ruled unconstitutional.
The letter calls for changes to the bill to prescribe that unclaimed equity “shall be considered abandoned funds and disposed of pursuant to G.L. c. 200A: Disposition of Unclaimed Property.”
The Unclaimded Property Division of the Massachusetts Treasury, says it, “connects citizens with their abandoned property such as bank accounts, uncashed checks, stocks or dividends, insurance policies, or the contents of safe deposit boxes. The state holds this reported property until the rightful owner or heir claims it.”
These advocates want unclaimed excess equity treated like any other unclaimed asset.
Lack of Judicial Oversight
The letter expresses concern at the lack of judicial oversight of the process and that the bill provides no meaningful opportunity for taxpayers to challenge the process. The letter proposes adding the following language to the bill:
“The Land Court shall retain authority over the process pursuant to this section for the sale or retention of property by a municipality or a purchaser of tax receivables following a final judgment of the Land Court foreclosing the right of redemption. If a homeowner challenges the process and requests a jury the homeowner shall have the right to transfer the action to Superior Court.”
Reduction in interest Rates
H.4624, as currently written, allows for 14 percent and 16 percent interest rates. The letter says these rates “make it impossible for many vulnerable homeowners to address their municipal tax debt.” The advocates call for an interest rate of eight percent.
Mandatory Repayment Plans
The letter also calls for mandated repayment plans across the Commonwealth and for the minimum payment at the inception of a repayment plan to be reduced from 25 percent to 10 percent. It also asks that the bill provide municipalities the discretion to reduce the amount of minimum payment below the statutory threshold.
It also advocates for a reduction in accrued interest to be reduced by 50 percent upon the request of an individual entitled to redeem the tax title for an owner-occupied residence. It seeks a 75 percent reduction in accrued interest for seniors and those whose primary source of income is disability benefits.
The letter also seeks for interest to stop accruing during any payment plan.
388 Liens Auctioned by Worcester in Three Years
In response to a public records request by This Week in Worcester, the City of Worcester provided a listing of all tax title liens auctioned to third parties from 2019 to 2023. The city did not conduct auctions in 2020 or 2021, during the pandemic.
Over the years of 2019, 2022, and 2023, the records provided by the city indicate 388 auctions completed for a total of just over $1.1 million. Seven auctions were completed for less than $100, with six of those being completed in 2023. The smallest completed auction was for $17.17. Of the total 388 auctions, 57 percent were for less than $2,000, with 133 (34%) auctioned for $999 or less, and 89 (23%) for between $1,000 and $1,999.
The largest completed auction was for $41,318.
The auctions completed by dollar range:
- $1 to $99: 7
- $100 to 199: 21
- $200 to $299: 17
- $300 to $499: 27
- $500 to $999: 61
- $1,000 to $1,999: 89
- $2,000 to $2,999: 46
- $3,000 to $3,999: 35
- $4,000 to $4,999: 28
- $5,000 to $9,999: 45
- $10,000 to $25,000: 8
- Over $25,000: 4
Auctions completed by year:
- 2019: 89
- 2022: 134
- 2023: 165
Tallage Brooks, LLC, and Tallage Davis, LLC, combine for 158 tax title liens purchased.
See the searchable database of all 388 auctions, below.
Please Note: The existence of a tax collector’s deed in any one year does not imply such a deed remains in existence. Most property owners ultimately redeem outstanding liens.
