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Volume 4 - Opinions of Counsel SBEA No. 53

Opinions of Counsel index

Taxes, delinquent (county as buyer) (appropriations) - Real Property Tax Law, §§ 406, 1018:

Tax delinquent property which a county has bid in will remain on the tax rolls in the name of the former owner where the county does not apply for a conveyance. Such property becomes the responsibility of the county where the county acquires title. Where a county purchases a tax lien at the time of tax sale, no actual transfer of funds is necessary; a bookkeeping change is sufficient. Where a county acquires property by tax deed, the property becomes subject to taxation after three years, and actual appropriations must be made. Where a county is forced into bidding in parcels at tax sales and immediately assigns them to interested parties, the county need not pay for the parcels before they are assigned; bookkeeping entries are sufficient.

Our opinion has been requested concerning a 1971 tax sale at which “X” county was forced to bid in a parcel improved by a dam. The county has subsequently been unable to assign this parcel for lack of interested parties and the question is whether the county is now “stuck” with the property.

Section 1018 of the Real Property Tax Law provides that if any real property parcel sold for taxes is not redeemed within the appropriate time, then, upon application in writing, the county treasurer will execute to the purchaser a conveyance of the real property sold. If no such application is made within five years from the last day of the sale, the certificate of sale becomes void, except where held by the state, the county, or a purchaser who is the owner of record of the lands sold (§ 1018(3)). There is thus no requirement that the county make application for such conveyance, and if it does not, the property will remain on the tax rolls in the name of the former owner.

If, however, the period for redemption has passed and the county has actually acquired title pursuant to subdivisions 1 and 4 of section 1018, then the county becomes the record owner. If the county cannot subsequently dispose of the property to another party pursuant to statute (§ 1018(4)), then the property is the responsibility of the county.

The next question is whether the county must appropriate money to actually pay the county treasurer for properties it has been forced to bid in at tax sale. Not only are there few cases, but those available involve merely the construction of local laws rather than the Real Property Tax Law. Therefore, the available precedents serve a rather limited purpose in regard to this problem since real property taxation in “X” county is governed by the Real Property Tax Law.

There appear to be but two cases in New York State relating to the question. In the first case, In re Ueck’s Estate (260 App.Div. 369, 22 N.Y.S.2d 740, rev’d, 286 N.Y.1, 35 N.E.2d 624), the decedent had been the owner of several parcels of real estate in Erie County, most of them situated within the City of Buffalo. Each parcel was encumbered by delinquent taxes and each was sold at public auction, pursuant to statutory authority. Several parcels were bid in by the City of Buffalo, in the absence of other purchasers, while at other sales, Erie County was deemed the purchaser by operation of law.

The charter of the City of Buffalo contained special provisions relating to tax assessments and collections. (Loc. Laws 1927, No. 4, published in Local Laws of Cities in State for 1932, p. 21.) The collection of an assessment could be enforced by sale at public auction on published notice, with the city being required to bid in on the property where there were no other purchasers (§§ 610, 611, 612). A record of all sales was made in the “transcript of unpaid taxes for the fiscal year.” The city paid for its purchase by a charge of the amount of its bid to the tax loan fund, also receiving a certificate of sale (§ 614).

Section 614 of the charter of the City of Buffalo reads (in pertinent part) as follows:

§ 614. Payment of bids; issuance of certificates . . . The city shall pay for its purchases by a charge of the amount of its bid to the tax loan fund referred to in section three hundred forty-nine of this act . . .

The issue in Ueck was whether or not taxes assessed against real property of the decedent prior to his death remained taxes, within the meaning of subdivision 2 of section 212 of the Surrogate’s Court Act after a tax sale of the real property at which a city or county was the purchaser, where a tax certificate had been issued but the right of redemption had not been terminated. Erie County Surrogate Court decided that a sale could not be an extinguishment of the delinquent taxes until consummated by (1) payment, (2) merger in a tax deed following notice to redeem or (3) foreclosure. The Court concluded that the taxes continued as a debt against the estate, and, therefore, such taxes had to be paid by the administrator in preference to other specified creditors. The Appellate Division affirmed this decision.

However, on appeal, the Court of Appeals reversed and stated (at p. 13), in reference to amendments to the aforementioned section 349 of the Buffalo City Charter:

The purchaser, whether the city or other person, was still required to pay its respective bid to the city treasurer within ten days after the sale, and the certificates of sale of the city, executed to it for its purchases, were to be retained in the treasury as city assets. The payment was a matter of bookkeeping, within the terms and contemplation of section 349 of the charter both before and after its amendment . . . (emphasis supplied)

In so holding, the Court of Appeals went through the Buffalo City Charter section by section and determined that such a bookkeeping item was still a “payment” as such of the taxes involved and, therefore, such taxes could not be considered a debt of the estate; the City had become the purchaser of a tax lien and the rights of such a purchaser were clearly set forth in the statute.

The only other case pertinent to the question, Devine v. County of Suffolk (71 Misc.2d 883, 337 N.Y.S.2d 423), involved an action to determine title to a parcel of real estate delivered to the county by virtue of a tax deed. Among other things the court concluded (at p. 427) that reading section 47 of the Suffolk County Tax Act, together with the general rule that tax statutes are to be construed more strongly against the government and in favor of the citizen, “. . . it is clear that the county should have made its payment of the bid price to the county treasurer just as any other purchaser would have done. This it apparently did not do but made a simple bookkeeping entry only.”

Section 47 of the Suffolk County Tax Act reads (in pertinent part) as follows:

The purchasers at such sales shall pay to the County Treasurer ten per centum of the amount of the taxes for which the property was sold, immediately after the sale of the property, and the remaining ninety per centum of such taxes within forty-eight hours after such sale, and thereupon the County Treasurer shall execute to each purchaser, including the County a certificate in writing which shall contain a description of the real estate purchased, the amount paid therefor . . . (emphasis supplied)

Further on the court stated that “no consideration was actually paid in accordance with section 53 of the Suffolk County Tax Act, and, accordingly, the deed to the county was void.”

Section 53 of said Act reads:

If such real estate, or any part thereof, be not redeemed as herein provided the county treasurer shall execute to the purchaser, including the county . . . upon the performance by such purchaser of the conditions herein provided . . . and upon the purchasers taking and paying for an assignment of all outstanding prior tax liens held by the county upon the premises . . . (emphasis supplied)

It would seem that the court in the latter case was relying on a strict and literal construction of words such as “payment” and “purchase”. This decision is in apparent disregard of the Ueck’s Estate case which, as has been discussed, required a broad interpretation of such terms, and accordingly held that the use of the bookkeeping item constituted a “payment” within the terms of the statute in question. (Although two different statutes were involved in these cases, it should be noted that the determination of the issues in each turned on what appears to be contradictory interpretations of the same terminology.)

There appears to be nothing specific in the Real Property Tax Law requiring actual monetary appropriations from one source to another to pay for parcels bid in by a county at a tax sale. However, in the absence of such specific statutory direction the more logical approach would seem to be that followed by the Court of Appeals in the Ueck’s Estate case (supra); viz., that a bookkeeping item transfer would be sufficient to meet the terms of the statute.

Indeed, this is the practice presently approved by the Department of Audit and Control. We have been informed by a representative of that Department, that there are actually two possible situations involved in the second question. The first is where the county is initially purchasing the tax lien at the time of the tax sale. In such case no actual transfer of funds is necessary; rather there should be a change in a bookkeeping item from the “Taxes Receivable-Overdue” book to the “Tax Sale Accounts” book.

The second situation is that encompassed in subdivision 5 of section 406 of the Real Property Tax Law, where the county has acquired property by tax deed and has held such deed for three years (during which time the property is deemed held by the county for a public use and therefore exempt from taxation and special ad valorem levies but liable for taxes for school purposes and special assessments). After the expiration of the three year period, the property becomes subject to taxation, and the county will then have to make actual appropriations to pay current taxes (e.g., for school district and village taxes).

Finally, it is indicated that in the past where the county was forced into bidding in various parcels at tax sales, it immediately assigned them to interested parties. The question is whether the county must pay for these parcels before they are assigned. Again, Audit and Control informs us that the procedure to be followed is to debit the “Cash Account” for the amount of money the county collected from the individual and credit the “Tax Sales Receivable Account”. However, moneys collected for interest and penalties (arising between the time the county acquired the lien and the time such lien was assigned to the individual) should be credited to the “Revenue Account”.

April 22, 1974