Purpose

An emergency measure requiring the street superintendent or district board to identify and provide notice to all lien claimants and other persons with a recorded interest in the property on which there are delinquent assessments for a special district before the sale of the property.

Background

Special districts are usually created to fill a need to enable services to be provided in an area that might otherwise be limited from receiving these services for various reasons. The formation of a special district creates a funding stream to pay for the desired or needed services by placing the responsibility on those directly benefiting from that service. The assessment district sells assessment bonds and the proceeds are used to build public infrastructure.

Assessment bonds are secured by a lien on each owner’s property for that property’s allocated share of the cost. The assessment lien is senior to all other liens except the lien of general taxes and prior special assessments. If the assessment payments are not paid when due, the assessment lien is put up for sale. Notice of the sale of the assessment lien is served to the property owner and any occupant. The property owner can pay the delinquent assessment up until the sale. After the sale, the property owner may redeem the property by paying the assessment amount plus interest, penalties and other costs.

If the owner does not redeem the property within one year, the purchaser of the lien can apply for and receive a superintendent of streets deed, granting title to the property, free from all liens except the lien for general taxes and prior special assessments. Notice of the application for the deed is given to the property owner and any occupant. The property owner or anyone with an interest in the property can still redeem the property until the deed is issued.

In a recent Superior Court case, Security Lenders, Inc. v. Countywide, the court held that a mortgage lender was not given sufficient notice when an assessment lien on a property was sold. This measure requires notice to be provided to all lien claimants and any other person with a recorded interest in the property.

There is no fiscal impact to the state general fund associated with this legislation.

Provisions

1. Requires the street superintendent or the district board to obtain a record search that shows all lien claimants and other persons with an interest in the property on which an installment of the assessment is delinquent.

2. Allows the cost of the record search to be added to the assessment and is deemed to be a portion of the delinquent installment.

3. Requires the street superintendent or the district board to serve by first class mail a notice of the date and place of the sale or postponed sale to the owner, lien claimants and any other person with an interest as shown by the search of records, at least ten days prior to the sale or the postponed sale. Specifies the notice requirements.

4. Prohibits the final sale from being held unless the notice has been provided to all lien claimants.

5. Allows the mailing to occur either before the date of the sale or before the date of any postponed sale. Stipulates that only one mailing and one record search are required.

6. Removes the requirement that the sale must take place no more than ten days after the last publication. Allows the sale to be postponed.

7. Includes all lien claimants of record and all persons of record with an interest in the property to the list of persons that the purchaser must notify that the property has been sold for a delinquent assessment.

8. Requires the notice to state that all interest in the property before or after the assessment lien will be extinguished except for the lien for general property taxes and prior special assessment upon issuance of the deed.

9. Requires the notice to state that, unless redeemed within the time allowed by law, a superintendent’s deed will be delivered to the purchaser and the deed conveys title to the property, free and clear of all interests and liens, except for the lien for general property taxes and prior special assessments.

10. Requires the deed or deed of superintendent to convey fee title to the property, free and clear of interests, liens, claims and encumbrances before or after the assessment lien, except for the lien for general property taxes and prior special assessments.

11. Specifies that a first lien on the property assessed is subject to the lien for general property taxes and prior special assessment.

12. Clarifies that the procedures for collection includes issuance and effect of superintendent’s deed.

13. Becomes effective on signature of the Governor.

14. Makes technical and conforming changes.

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