Property Tax Reform Unanimously Passes Georgia Senate

Posted on March 15, 2010 by Kevin Caiaccio

Last Thursday, the Georgia Senate unanimously passed property tax reform which is designed to restore taxpayers' confidence in the fairness of the system of assessing property values.  The bill, which was introduced by Sen. Majority Leader Chip Rogers, will require that an assessment notice be sent to property owners every year.  The current system requires a notice only when the assessed value changes.

The version which passed the Senate was changed from the initial draft as previously summarized on this blog in the following respects:

  • The taxpayer will have 45 days to appeal the proposed assessed value.  As I previously commented, the initial proposal of one year was unworkable.
  • The requirement that an increase in value must be unanimously approved by the board of equalization was removed.
  • The annual notice will include a pro forma estimate of the current year's taxes based on the prior year's millage rate.
  • There is a more detailed definition of "arm's length, bona fide" sale which specifically includes distress sales, short sales, REO sales and foreclosures.
  • The county's tax digest may be approved even if taxpayers' appeals are pending.

I believe that this is a good bill which will lead to a more transparent and accurate system for assessing property values.  Georgia property owners are currently paying taxes based on assessments which often do not reflect declining values.  Under the proposed new system, assessed values should fall more in line with market prices.  The downside is that  local governments will face the challenge of either raising millage rates or finding other sources of revenue to make up for lower tax receipts.

The bill now moves to the State House for further consideration. 

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Recent Foreclosure Reform Proves Ineffective

Posted on March 11, 2010 by Kevin Caiaccio

Given the dramatic rise in foreclosures over the past several years, the Georgia legislature has tackled foreclosure reform on several occasions.  However, this reform has largely been cosmetic and has not helped property owners or lenders.

The most recent attempts at reform are currently pending in the legislature and,  like other recent efforts, are mostly lacking in substance.  House Bill 1228  would provide the borrower with a statutory "right of redemption" for 90 days after the foreclosure sale.  The right would very rarely be exercised because it involves the full payoff of the debt plus penalties within 90 days.  House Bill 972 introduced by Rep. Billy Mitchell would provide a 90-day right-to-cure period after default which the debtor could exercise once every 24 months. 

In 2008, the last time foreclosure reform passed, the measures centered on the content of the notice to the borrower.  While somewhat helpful, many of the reforms do not include a  remedy for violating the provisions.

In my opinion, none of these reforms addresses the major problem with the current system and that is the obstacles to potential buyers bidding at the foreclosure sale.  Although the current system requires notice of the sale by publication for 4 weeks, potential bidders face several challenges:

  • Little or no opportunity to perform due diligence
  • No set time for the sale to occur (other than a 6-hour window on the first Tuesday of the month)
  • No prior notice of when a sale is canceled or postponed

These problems are particularly acute in commercial foreclosures, and the result is that there is rarely competitive bidding.  The lenders are then forced to repossess the property and deal with the headaches of REO property rather than having the chance to mitigate their losses.  I have clients who are often interested in acquiring property at foreclosure but do not have an adequate opportunity to bid.

Any foreclosure reform should focus on improving the bidding procedures so that the sale functions more like a normal auction. 

I'm interested in hearing others' opinions concerning how best to reform our system.  Reform shouldn't be just about helping debtors keep over leveraged properties but also about helping lenders mitigate losses and having properties trade at appropriate values.

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