PROPERTY TAX
CERTIFICATE CLAIMS
HANDLING TAX CLAIMS PRE-CONFIRMATION
By Steven M. Palmer, Curtis & Casteel Law Group, PLLC
http://curtislaw-pllc.com/
(article co-authored by Patrick D. Miller, Licenced in OH)
T
his article is a follow up to an
article written in the Cleveland
Metropolitan Bar Journal in
October, 2014 wherein we looked
at how tax certificates can be set up
and treated in chapter 13 plans. That
article resulted from several cases
where tax claims were objected to post
confirmation. Those claim objections
resulted in a couple of opinions which
formed a more secure legal basis for
the way we advocated treating the
claims. Soon after those decisions, the
tax certificate holders began objecting
to confirmation and filing their claims in
the same manner as they had before
the decisions. Many of those objections
to confirmation were contested and
one overruled objection resulted in an
opinion which affirmed the treatment
we sought. That opinion was appealed
to the district court which has now
affirmed the bankruptcy court’s ruling in
In re: Sadler No: 13-17696 N.D. Ohio
Eastern Division.
First,
background.
48
a little about the
In the twelve largest
CONSUMER BANKRUPTCY JOURNAL
counties in Ohio delinquent property
taxes can be sold to tax certificate
buyers. Outside of bankruptcy, those
buyers can charge up to18% simple
interest and not give the parcel owner
credit for having paid any of the
principal balance in a redemption plan
until the entire balance is paid in full
to the final penny. This meant huge
interest payments on often already
huge property tax arrearages. The
Ohio Revised Code provides that the
tax certificate buyers can purchase
these tax certificates in one of two
ways. First, the law outlines how
the certificates can be sold at public
auction with interest rates starting at
18% and going down from there in
.5% increments. The second method
for sale of these certificates is through
“negotiated sales.” Ohio Rev. Code §
5721.01 et seq. (2013). In Cuyahoga
county, the most populous county in
Ohio, all sales have been through
“negotiated sale” to one locked in buyer
at a time for the max interest rate over
the last several years. The current
buyer is Woods Cove III, LLC. I put
Spring 2016
“negotiated sales” in quotes because
the terms could not legally be any worse
for the county. A recent decision in the
U.S. District Court for the N.D. of Ohio
Eastern Division recently affirmed the
treatment many in the debtors bar had
been using to treat these tax claims. In
re: Jerome Sadler, 2015 WL 9474174
(N.D. Ohio Dec. 29, 2015). This article
explores that decision and again gives
an example of how the claims can be
properly treated.
Debtor’s counsel had proposed
to pay the certificate holders their prepetition interest and attorney’s fees
as unsecured. He had proposed to
pay the certificate purchase price of
the certificates as secured with 18%
interest as provided for on the face of
the certificates. The certificate holders
objected insisting that they could add
the unmatured interest that would
have come due over the 60 months of
the plan to the secured claim. In their
appeal the tax certificate holders were
insisting that they could only be paid
pursuant to the state law redemption
National Association of Consumer Bankruptcy Attorneys