The City of Pittsburgh Property Reserve:
A Guide for Community Development Corporations
Prepared for the Vacant Property Working Group (VPWG)
A Pittsburgh Community Reinvestment Group (PCRG) Program
December 17th, 2007
Pittsburgh Community Reinvestment Group
1901-15 Centre Avenue, Suite 200
Pittsburgh, PA 15219
Tel: (412) 391-6732
Fax: (412) 391-6737
The City of Pittsburgh Property Reserve:
A Guide for Community Development Corporations
TABLE OF CONTENTS
History and Background
PA Second Class City Treasurer’s Sale and Collection Act
The Vacant Property Working Group (VPWG)
Creation of the City Pittsburgh Property Reserve
Vacant Property Acquisition in Pittsburgh
City of Pittsburgh Sideyard Sales Program
Private Partnerships and Real Estate Owned (REO) Property
The City of Pittsburgh Property Reserve
Property Information Request
Application and Selection
Treasurer’s Sale and Redemption Period
Deposit and Promissory Note
Clearing Title
Lien Buybacks
Settlement
Default Provisions
Other Property Acquisition Issues
Inclusion of City Owned Property in the Reserve
Inclusion of Occupied Property in the Reserve
The Property Reserve and For-Profit Developers
List of Attachments
- Resolution and Memorandum of Understanding establishing the Property Reserve
- Sideyard Sales Program Guidelines
- Request to Purchase Three Taxing Body Property
- Project Feasibility Application
- Sample Notification of Approval Letter
- Promissory Note
- Proposal to Purchase Property from Land Reserve
- Sample CARC Lien Statement, provided by ELDI
- Sample Lien Payoff Agreement Letter, provided by ELDI
- Sample Settlement Sheet, provided by ELDI
- Policy Governing Inclusion of City Owned Property in the Property Reserve
- Policy and Procedures for Property Flipping
- Revised ProceduresCity of PittsburghLand Reserve Applications
HISTORY AND BACKGROUND
PennsylvaniaSecondClassCity Treasurer’s Sale and Collection Act
The City of Pittsburgh utilizes a Treasurer’s Sale as the primary method of enforcing tax collection and acquiring tax delinquent property. The Second Class City Treasurer’s Sale and Collection Act of 1984 defines the public process forthe
“charge against real property, liened or unliened, held by a taxing body or an
authority created by that taxing authority on account of delinquent real estate
taxes, water rates, sewer charges, municipal assessments, municipal judgments,
demolition liens, or other amount due to a taxing body under the Municipal
Claim and Tax Lien Law of 1923.”
According to Pennsylvania law, tax claims including water rates and sewage service charges, have a first lien against a property from the date when they first became due and have priority over any other claim against the property including mortgages, judgment claims, liens or other obligations with which the property is charged.
A treasurer’s sale is a public sale in which a minimum sale price is established and public bids are accepted for purchase. The minimum price at sale, set by the treasurer, covers delinquent taxes, liened and unliened; water rents; sewage service charges; and other municipal claims. It is important to remember that the treasurer’s sale system is intended to be a tax collection mechanism, not a foreclosure mechanism, such as the CountySherriff’s Sale. Under a treasurer’s sale, the city treasurer is responsible for establishing a system of effecting notice to interested parties. Because the system only notifies the Three Taxing Bodies at time of sale, not all interested parties, a Treasurer’s Deed is only conveyed at the end of sale. Purchasing a property at treasurer’s sale does not satisfy any liens or judgments outside of municipal claims. The purchaser only receives a treasurer’s deed to the property, which is why the typical purchaser of property at a treasurer’s sale is the taxing body itself.
In order to clear title to a property acquired at a treasurer’s sale, the taxing authority acquiring the property must“file a petition with the court to quiet title, in favor of the city to the property acquired at treasurer’s sale in favor of the city. Only those interested parties who had no prior notice may appear and protect their interest by paying claims and liens having priority senior to their interest. Liens, including tax and municipal claims, shall be stricken from the subject property by the order granting clear title.”
Properties can be identified for a treasurer’s sale after two years of tax delinquency. The City uses the sale as a tax collection mechanism and will place properties into the sale for revenue purposes. The City does not use the sale as a mechanism for acquiring property for their own portfolio, although the sale can be used as an acquisition tool for the Urban Redevelopment Authority (URA) and for non-profit Community Development Corporations (CDCs).
TheVacant Property Working Group (VPWG)
Despite having the enabling legislation, the City of Pittsburgh was hesitant to utilize the treasurer’s sale process because it looked bad politically. The city wanted a less political and more affordable means of recycling property and returning delinquent properties to the tax roll. In 1988, a volunteer sub committee was formed with the goal of decreasing the redemption period and to work on creating a program for the acquisition of side yards. The committee was successful in both establishing a Sideyard Sales Program and reducing the redemption period from one year to 90 days. The evolution of this effort was the Vacant Property Working Group (VPWG), now housed at the Pittsburgh Community Reinvestment Group.
PCRG’s Vacant Property Working Group (VPWG) is a coalition of community stakeholders working collectively toward the eradication of vacant and nuisance properties in the City of Pittsburgh and AlleghenyCounty. VPWG partners include community organizations, faith-based entities, government agencies, financial institutions, universities and other community stakeholders. The VPWG mission is to build and refine the policies, programs and resources necessary to recycle vacant land and promote community revitalization. While the VPWG advocates for sound public policy regarding vacant property and land recycling, the main function of the program is the administration of the City of Pittsburgh Property Reserve.
Creation of the City of Pittsburgh Property Reserve
In 1996, the City of Pittsburgh and PittsburghPublic Schools sold a tax lien portfolio to National Tax Funding, L.P. to be serviced by Capital Asset Research Corporation (CARC). The portfolio sale included all City and school district real estate tax liens as well as water and sewer liens through 1996. The agreement also established a purchase of additional liens issued in the years 1996 to 1998 to be purchased at a future date.
The possibility of a portfolio sale raised concerns among community organizations about what would happen to large tracts of vacant property in their communities. Through the work of the VPWG, an agreement was reached that provided community development organizations the opportunity to identify and exclude property from the tax lien portfolio sale. A Memorandum of Understanding (MOU) was established between the City of Pittsburgh, Urban Redevelopment Authority (URA), and the Pittsburgh Community Reinvestment Group (PCRG). This agreement established (1) a process that allows Community Development Corporations to exclude properties prior to a lien portfolio sale and (2)aproperty reserve for the placement of future development properties. The complete City Council Resolution and MOU are included in Attachment A. This is the legal document establishing the reserve process and also outlines all administrative policies and procedures to be followed by all parties.
An agreement was also crafted between the VPWG and Capital Asset Research Corporation (CARC) that established the parameters of a working relationship. The agreement was meant to ensure consistent communication and reporting between the parties, including the disclosure of monthly portfolio reports.
VACANT PROPERTY ACQUISITION PROGRAMS
In the 2003 report Reclaiming Abandoned Pennsylvania, the Housing Alliance of Pennsylvania estimated that the City of Pittsburgh has nearly 19,000 vacant and abandoned properties. Vacant properties cost municipalities money by decreasing property values, increasing crime, health and safety concerns and contributing to the overall deterioration of neighborhoods. Nuisance properties and negligent property owners erode the quality of life for residents and prevent private investment in neighborhoods.
The identification of vacant, abandoned and nuisance properties is the critical first step in abatement. Currently, there are a number of programs and mechanisms in place for community organizations to abate or acquire vacant and nuisance property. Before deciding upon an acquisition strategy, a CDC must conduct the necessary due diligence to choose the most cost effective and appropriate method foraddressinga vacant property. A minimum amount of research must be conducted to understand the property history and to be able to weigh options for abating problems associated with the property. Basic property information that should be compiled includes:
Location: Can you identify the correct street address and lot and block number. Make sure to cross check your location information with both the City and County.
Owner of record: Is the property privately owned, publicly owned, owned by a bank or corporation? Identifying the owner can aid in direct purchase negotiations.
Vacancy status: Is the property vacant or occupied? Even if it is tax delinquent and appears to be vacant, anyone residing in a structure (legally or illegally) could trigger relocation costs in development if you are using public funding, such as CDBG or URA money.
Tax delinquency: Is the property at least two years delinquent on city taxes? How much is owed on the property? If there is very little owed, it is likely a property owner will redeem the property before it goes to sale.
Liens or foreclosure activity: Identify any additional claims or judgments made on a property by using the Prothonotary website. If there are other claims on a property, a foreclosure process may be another option for acquisition.
Below are common resources where most of this information can be obtained:
AlleghenyCounty Real Estate – Basic property information and county tax information
www2.county.Allegheny.pa.us/RealEstate
City of Pittsburgh Tax delinquency report – City real estate tax delinquency
AlleghenyCounty Prothonotary – Liens, foreclosure activity, and other claims against a property
Based upon property research, there are a number of different paths a community organization may choose to address a vacant property. It is important to remember that each property will have unique circumstances that may prevent a certain approach from working. CDCs are encouraged to work closely with the VPWG manager to target problem properties or properties needed for a larger development deal.
City of Pittsburgh Sideyard Sales Program
The VPWG was instrumental in the creation of a City Sideyard Sales Program that provides property owners an opportunity toaffordably purchase an adjacent, vacant lot. The program is an effective means of recycling vacant land and increasing property values for a homeowner as well as improving the appearance of a neighborhood. The Sideyard Program receives a line item in the City Capital budget annually (was $250,000 in the 2006 budget) and is often overlooked and underutilized by residents and community groups. Community organizations need to play an important role in the marketing of the sideyard program and should educate residents about this opportunity if there are suitable vacant lots in the neighborhood.
In order to be eligible for the sideyard program, a resident must own the property that directly borders the vacant lot and be current on all taxes. Additionally, the lot must be deemed unsuitable for development and must be owned by the City. If the lot is not owned by the City, a request can be made for the City to acquire the property through a treasurer’s sale. A complete list of program guidelines is included in Attachment B. The total cost for acquiring a lot through the Sideyard program is approximately $400 and a resident interested in purchasing a vacant lot through the sideyard program must submit a Request to Purchase Existing Three Taxing Body Property (Attachment C) to the City Real Estate Department. Any questions on the City Sideyard Sales Program should be directed to the City Real Estate Department.
Bank/REO Property
The Pittsburgh Community Reinvestment Group (PCRG) has established relationships with 14 local financial institutions as well as national lenders such as CitiFinancial, HSBC, and Chase Home Finance and corporations such as Fannie Mae. As part of this working relationship, local and national lenders regularly provide PCRG with updated lists of their Real Estate Owned (REO) properties. These lists are distributed to community organizations that can then identify any properties in theirneighborhoods that they would like to target for homeownership opportunities or to acquire for a development project. CDCs and community organizations can provide service to a lending institution by helping them sell properties in their REO property portfolio and this is a valuable service that PCRG partners have access to. Additionally, if a property identified by a CDC is owned by a lending institution, we encourage you to contact PCRG staff to see if they can facilitate a purchase negotiation.
The City of PittsburghLand Reserve
The land reserve is intended to be a tool for non-profit CDCs to affordably acquire and assemble vacant land for development projects. Properties identified for the land reserve must be part of a strategic rather than speculative development plan as defined by the CDC business plan or neighborhood plan. Organizations who wish to utilize the land reserve as part of their development strategy must adhere to the process guidelines and communicate with the VPWG manager on a regular basis.
I.Property Information Request
If the appropriate path for acquiring a property is determined to be the Treasurer’s Sale and Land Reserve, then a CDC must submit an information request to the Pittsburgh Community Reinvestment Group (PCRG) Program Manager for the Vacant Property Working Group (VPWG). The deadline for requests to PCRG is noted in the Treasurer’s Sale schedule, and is usually 12 weeks prior to the Treasurer’s Sale date. Requests should be e-mailed to nd should include the following information:
- Lot and Block
- Street Address
- Owner of Record
- Ward
- Vacancy Status (Vacant, Y/N)
- Vacant Lot/Structure
The basic requirements for a property to be considered for the reserve are that the owner must be at least two (2) years tax delinquent and that the property is vacant.
After compiling all requests, the VPWG manager acts as facilitator between CDCs, the City and URA. This initial request step will identify any major problems associated with a property of interest and will also allow the CDC to understand what may be involved with a property before investing time in the completion of a formal application. Flags that may occur in this stage include owners on payment plans or who have filed for bankruptcy and properties with large amounts of encumbrances. If properties submitted are unable to be processed for the sale, the City will notify PCRG who will then provide notification to the appropriate development corporations.
II.Application and Selection
If properties are determined to be eligible for the treasurer’s sale, a CDC must thensubmit a Project Feasibility Application(Attachment D). The application provides information pertaining to the plan for the property, including detail on the development project that it is a part of. Applications must be complete and should provide as much detail as possible regarding property research, development plans, and sources of development financing. The MOU states that “URA pre-application properties approved for placement in the Land Reserve will be treated as properties being transferred to the URA.” Therefore, it is at the discretion of the URA which properties are accepted according to their development and funding standards. A written development and financing plan must be available.
Project Feasibility applications are available through PCRG and once completed should be sent to the following agencies:
Urban Redevelopment Authority of Pittsburgh
200 Ross Street
Pittsburgh, PA15219-2069
Attn: Jerome Frank
Tel: (412) 255-6672
Fax: (412) 255-6645
City of Pittsburgh Department of Finance
200 City-CountyBuilding
414 Grant Street
Pittsburgh, PA 15219-2476
Attn: Mary Lou Tenenbaum
Tel: (412) 255-2468
Fax: (412) 255-2438
Pittsburgh Community Reinvestment Group
P.O. Box 53009
Pittsburgh, PA15219
Attn: Bethany E. Davidson
Tel: (412) 391-6732 ext. 201
Fax: (412) 391-6737
Allegheny County Department of Economic Development
425 Sixth Avenue, Suite 800
Pittsburgh, PA15219
Attn: Michael Pehur
Tel: (412) 350-1000
Fax: (412) 642-2217
Please note that the Dept. of Finance will NOT accept electronic applications. When submitting an application to the Finance Dept. via fax, please limit the number of pages sent to the Project Feasibility application only. Complete applications with attachments, photos and supporting documents should be sent to both the URA and PCRG.
Once applications are reviewed and approved by the aforementioned authorities, properties are certified for inclusion into the City Treasurer’s Sale. The URA sends notification to the City approving the application and a selection letter is mailed notifying CDCs that the property has been selected for inclusion in the Treasurers Sale (Attachment E). CDCs can also check on the status of their property through the Property Reserve Reports provided at the monthly VPWG meetings. Any questions or concerns regarding a property’s inclusion in the sale should be directed to the VPWG program manager.
Once a property is selected for inclusion into the Treasurer’s Sale, certified notices are mailed to the owner of record and notices of inclusion in the Treasurer’s Sale are advertised twice in the Pittsburgh Post Gazette, the Legal Journal, and posted twice on the property itself. All costs of advertising are added to the final cost of the property. During this notification phase, property owners are able to enter into a payment plan to repay delinquent taxes. If the owner of record does not enter into a payment plan or pay the taxes due in full, the property is included in the Treasurer’s Sale.