CLEVELAND, Ohio — Cuyahoga County’s controversial sale last year of liens on properties with delinquent taxes prompted more than a third of the property owners to pay their bills, the county has reported.
County Fiscal Officer Wade Steen said that the success rate, as well as new limits placed on the sales, won over some skeptics who had worried about saddling already struggling property owners with bigger debts and exacerbating the foreclosure crisis.
“When we first started down this process, people were totally against it,” Steen said. “But it’s a tool that when used right can help us.”
Frank Ford, chairman of the county’s Vacant and Abandoned Property Action Council and a onetime skeptic of lien sales, gave the latest sale his approval in a letter this month to county Executive Ed FitzGerald.
“We have worked with county staff to make this process one which is effective, equitable and support strengthening [for] neighborhoods,” Ford said in the letter.
A tax lien is a legal claim filed against a property by the county to collect a debt. Private firms buy a collection of liens, pay the county the overdue taxes and then collect from property owners, adding on as much as 18 percent annual interest. Foreclosures are allowed by law if the property owner has not paid within a year.
The county sold liens on 2,329 properties to one investment company a year ago this month, recouping $14.4 million for municipalities, schools and libraries. It was the first such sale in three years.
Since then, owners of 786 properties have settled their bills, paying $5.2 million in overdue taxes, plus interest.
Woods Cove LLC — the company that bought the liens –filed a notice of intent on Thursday to foreclose on 1,543 properties. The company must wait 120 days before beginning foreclosure action.
On the list of possible foreclosures is a $2.7-million house in Hunting Valley and a $3.1 million retail strip on Pearl Road in Parma Heights. The homeowner owes $179,000 in back taxes. The owner of the Pearl Road property owes $229,000.
Steen called the 34 percent collection rate a success, similar to what other counties find.
“It’s another tool to collect back taxes and to deal with vacant and abandoned properties,” he said.
Before selling the liens last year, the county workers and housing advocates scrubbed every vacant property from the offerings. They also eliminated properties owing less than $2,000 and those with tax bills greater than 10 percent of their property value.
“The fiscal office was very open, so it benefited the tax base not just in the short term but the long term as well,” said Kamla Lewis, Shaker Heights’ director of neighborhood revitalization. “Every [lien] that turns into a paid-off lien is a good thing.”
The county spent 10 days last fall negotiating the sale with Woods Cove, the same company that bought a $5.5 million batch of tax liens in Summit County. Colorado-based Axis Capital Management Inc. is servicing the liens.
The company is now working with community development corporations, Cleveland city council members and the Cuyahoga County land bank to decide which properties to foreclose on, Steen said. Vacant homes are a priority, so cities or the land bank can take them over and either raze them or fix them up.
“[Woods Cove] doesn’t want to own them,” Steen said. “They just want to collect the taxes.”
In May, the county sold another 2,032 tax liens, worth $7.6 million, to CapitalSource Bank.