Taking the Mystery out of Property Taxes

            While Pennsylvania lawmakers and taxpayers continue to search for answers to property tax reform, it’s important for business and homeowners to understand the current Pennsylvania property tax laws and procedures.

            Pennsylvania property owners pay real estate taxes twice a year through their local tax collector. Tax collectors are elected officials and are charged with the responsibility to collect all real estate taxes from business property owners and from homeowners. Each township or borough has a tax collector. You can find the name and address of your tax collector by checking your tax bill or by contacting your township or borough office. Most townships and boroughs have informative websites; some of them include contact information and office hours for the tax collector.

            In the spring, tax payers receive a real estate tax bill for the taxes they owe to their county and to their township or borough. This bill is generally referred to as the “county/township” tax bill. The revenues are shared by the county and township and pay for many needs, from social services for children and the elderly to local road repair and maintenance. During a “discount” period which ends on April 30 of each year, taxpayers are entitled to a 2% discount on this tax bill. But if your annual county/township taxes remain unpaid on July 1, you will owe a 10% penalty in addition to the base tax.

            In the mid-summer, tax payers receive their second annual tax bill—this one is for school taxes owed to their school district. Similar discounts and penalty periods apply; by December 1^st, unpaid school taxes carry a 10% penalty.

            While you may think of summer as a time to enjoy Pennsylvania’s beauty and outdoor fun, inside the county courthouses, the Tax Claim Bureau employees are busy working hard to get ready for the “upset” sales in September. Pennsylvania law requires counties to hold tax sales, usually referred to as “upset” sales, starting the second Monday in September and concluding by October 1. If you owe delinquent county, township, borough or school taxes on your home or other real estate, the county has the authority to sell your property at the annual upset sale. In 2005, the county will sell properties for which the 2003 real estate taxes remain unpaid.

            The county employees issue notices of the upset sale at least 30 days before the sale date. They must advertise the list of properties in the local newspapers, must send the owners certified mail notice and must physically post a notice on the properties.

            Recently, a Pennsylvania man lost his business property even though he didn’t personally receive the certified mail notice of the tax sale. The man operated two small businesses on the property and one of his employees signed a registered mail notice of the sale. The man claimed that he never saw the mail notice and that he either disregarded or never noticed the posting of the property. Like most property owners, he didn’t read the lengthy list of tax sale properties squeezed into the classified ads in his local paper. After learning that the property was sold, he filed objections to the sale.

            The Pennsylvania Commonwealth Court found that the property owner was not entitled to any relief. Because the man paid a substantial payment on his delinquent taxes just two business days after his employee signed the certified mail notice, the Court found that it was likely that he did actually know of the sale. This, coupled with the fact that the property was properly posted and the sale was publicly advertised, convinced the Court that the sale was legal and fair.

            If you receive a notice of tax sale this summer, don’t ignore it. Even if you are absolutely certain you paid your property taxes, or if you escrow your taxes with your mortgage lender and are certain the lender paid, you still are at great risk if you ignore the notice. Don’t just rely on assurances from your lender that it has paid the taxes. Go to the county Tax Claim Bureau and produce your proof of payment; don’t give up until you are sure your property has been removed from the upset sale list. If you have any doubt, attend the sale in person and make sure your property isn’t put up for sale. If you haven’t paid your 2003 taxes, you may be entitled to enter into a payment plan with the county which will entitle you to have your property removed from the upset sale list while you make periodic payments on the delinquent taxes.

            Thinking of grabbing a bargain property cheap at a tax sale? Be careful—you will take title with all the mortgages and other legal liens still on the property. While certain forced legal sales clear a property of all its previous liens, tax upset sales don’t. If you buy a property at tax upset sale, you can’t sell it unless you pay off all its liens and mortgages as part of that sale.