A woman who owns her home outright is in danger of losing it because she fell behind on her taxes when she lost her job.
Linda Hart, of Linda Lane, is being foreclosed upon by American Tax Funding even though she has faithfully paid them $300 a month for three years to cover her back taxes.
In response to the foreclosure notice, she has hired an attorney who is arguing in state Supreme Court in Schenectady County that the city illegally sold Hart’s liens to ATF.
Attorney Anthony Pietrafesa is also questioning ATF’s 21 percent interest rate, which he says is usurious. In New York state, the highest interest rate that can be charged is 16 percent, he said. Municipalities are exempt, and Schenectady charges 21 percent.
But ATF can’t, he argues.
He said the interest rate led to Hart owing $3,500 in interest every year. “She can’t catch up. They don’t want you to pay it off,” he said.
Starting in 2009, she has paid a total of $15,000 to ATF, which is thousands more than her original bills. ATF says she owes another $19,000.
At the current tax rate for the city, schools and county, she would have owed a total of $12,836. But she likely owed even less, since the combined tax rate was much lower when she missed her payments.
She didn’t pay her taxes in 2007, 2008 and 2009 because she lost her job. But, she said, the situation would not have been as dire if the city’s taxes were not so high.
She used to pay $1,200 a year in total taxes. Now she pays more than $4,000.
“The property taxes in Schenectady are way too high,” she said. “The city ought to focus on cutting the expenses and the waste.”
Pietrafesa said she owns her house because it has been passed down through family members, and although the equity in the house is much higher than the ATF bill, she doesn’t want to sell.
And ATF is no longer willing to accept her monthly payments, Pietrafesa said.
“They’re not asking for the money, they’re just asking for the property,” he said.
If Hart successfully fights off the foreclosure, the decision could have far-reaching effects.
Pietrafesa has filed court papers arguing that the foreclosure is invalid because Schenectady could not sell tax liens to ATF from 2005 to 2009. Hart’s liens were sold in 2007, 2008 and 2009. If a judge sides with him, many foreclosures will be stopped in their tracks.
ATF originally bought liens from the city in 2004 after the state passed special legislation allowing a one-time sale. But city officials wanted to keep selling the liens, and believed the legislation would allow them to do so if they only sold to ATF.
The legislation was unclear. Either it allowed the city to sell liens until Dec. 31, 2004, or it allowed the city to enter into a contract by that date. The city took the second definition and agreed to a contract that was used for the next five years.
The law says that “until December 31, 2004, the city of Schenectady may enter into a contract to sell some or all of the delinquent tax liens held by it.”
In 2009, the city asked for “permanent” legislation to sell tax liens, which would have allowed Schenectady to take bids from many companies and select a new buyer.
Instead, the state passed a narrower law, allowing one more sale in late 2009 but specifying that the law would expire on December 31, 2011 and be automatically repealed.
Pietrafesa says the legislation never specifically said the city could keep selling the liens between 2004 and 2009, and that the state’s second law clearly showed that it had not intended a continuous sale.
“It wasn’t supposed to be an ongoing thing. On the bill jacket you have Sen. [Hugh] Farley saying this is a one-time sale,” he said. “I don’t think they meant to keep doing it. It was just irresistible. ATF kept buying.”
ATF attorneys did not return a call seeking comment, but city Corporation Counsel John Polster said the city could prove it sold the liens legally.
“You get into some very technical arguments,” he said. “I believe he is wrong. I believe we were legally able to do it.”
And even if the 2004 law wasn’t clear, he said, the 2009 law retroactively approved the later sales.
“There was another contract that was authorized. There was another piece of legislation that specifically authorized that,” he said.
The 2009 law did authorize the city to sell any liens “held by it,” but does not mention sales occurring prior to the passage of the legislation. The 2009 law also doesn’t specifically allow 21 percent interest. It says ATF can charge “reasonable and necessary collection costs.”