Syracuse lawmakers approve new process for seizing tax-delinquent properties

Syracuse, N.Y. — The Syracuse Common Council on Monday unanimously adopted changes in the way the city seizes properties from owners who have failed to pay taxes.

If signed by Mayor Ben Walsh, a new law will establish a procedure in which owners can recover money for their properties if they are worth more than the tax debt. The change became necessary because of a U.S. Supreme Court ruling last spring that affected foreclosures in 10 states, including New York.

In a case involving a Minnesota condo owner, the Supreme Court’s decided the U.S. Constitution’s Fifth Amendment gives owners rights to the value of their property in excess of their tax-related debt. The condo owner had sued after she lost her home to a county over $15,000 in tax debt, interest and penalties and the county sold it for $40,000. The court said she was entitled to the $25,000 difference.

Since 2013, Syracuse has foreclosed on tax-delinquent properties and transferred them to the Greater Syracuse Land Bank. The public authority then works to partially renovate those properties and then sell them to responsible owners, but there has never been a way for the former owners to recover the value of their equity beyond what they owed.

The city paused foreclosures after the Supreme Court’s May ruling while its legal department researched how Syracuse can bring its foreclosure process into compliance. Their solution is to add a new step that would provide tax-delinquent owners a chance to file a claim for excess value.

In addition to the many notices owners already receive as part of a foreclosure, the new law requires an additional notice a month before a seizure. That would give owners 30 days to file a claim for surplus equity on the house if they don’t pay the back taxes. For seized properties with claims, the land bank would have an independent appraisal performed to determine fair market value of the seized property. If that value exceeds what is owed, a proceeding overseen by an independent hearing officer will determine the amount due to the owner.

The land bank would pay out the excess value from its funds, and the city would reimburse the agency for the total amount spent each year. During a common council committee meeting earlier this month, some city lawmakers expressed concern about the unknown cost of the new program. The land bank estimated that it could amount to $300,000 per year based on past cases, but said the figure is difficult to pinpoint.

To help alleviate council concerns, the agreement between the city and the land bank was changed to require council approval if expenditures in a calendar year exceed $300,000.

Walsh is now required to hold a public hearing on the proposed law. A notice for that hearing must be issued within 10 days of the mayor’s office receiving the approved law from the council, and the hearing date must be at least five days after the notice is posted. Walsh has 30 days to sign or veto the law.

City reporter Jeremy Boyer can be reached at jboyer@syracuse.com, (315) 657-5673, Twitter or Facebook.