New amendment changes how municipalities reduce delinquent taxes

Confusion regarding a recently signed bill has created some misunderstandings about how it will affect real estate and transactions.

“Act 93, originally House Bill 388 (Parker, D-Philadelphia), only changed how municipalities reduce property tax claims and tax liens to a final judgment in that county,” said PAR legal counsel Brett Woodburn. “As a result, municipalities no longer have to incur the expense of suing delinquent property owners to get a final judgment. This really expands the arsenal of weapons that municipalities have at their disposal to collect delinquent taxes and fees.

“There is some concern that this amendment changed how title searchers and abstractors have to investigate or search property taxes or municipal liens,” Woodburn explained. “Nothing in the amendment changes how we search, analyze and resolve judgment liens against real estate. Because it’s easier for municipalities to reduce delinquencies to a final judgment however, it stands to reason that municipalities will be more likely to pursue those delinquencies.”

Importantly, the way final judgments are transferred to other counties has not changed. “Municipalities have always had the authority to sue a delinquent property owner and have the claim reduced to a final judgment,” he said. “Transferring judgments to other counties is done by following well-established rules and procedures: 1) file a certified copy of all docket entries in the action; 2) the prothonotary where the judgment is transferred shall enter it in the appropriate docket and in the judgment index against the defendant; 3) enforce the money judgment. Enforcing judgments has its own well-established rules and procedures.”

“The Pennsylvania Association of Realtors® provided input to Rep. Parker regarding this bill to ensure that private property rights were protected,” said Kim Skumanick, PAR president. “PAR recognizes that property taxes are a significant burden to many property owners. It’s one of the reasons we support Senate Bill 76, a plan that eliminates school property taxes to reduce this overwhelming hurdle to homeownership.”

Some have voiced concerns that the effect of this amendment could cause some transactions to fall apart because the seller may not have enough equity to satisfy all liens against the property. When asked about this, Woodburn responded, “I suppose that might be true. This amendment makes it easier for a municipality to collect on delinquent property taxes. It stands to reason that some municipalities will be more diligent in collecting that debt.” It’s important for Realtors® to remind sellers that questions pertaining to liens and encumbrances are included on PAR’s Sellers’ Property Disclosure Statement and having accurate information helps reduce the risk of settlement delays or cancellations.

Editor’s note: This article has been revised from the original. The act only changes how municipalities reduce property tax claims and tax liens and does not affect other types of municipal claims.