Bill would give RI bidders an advantage in municipal tax sales

Rhode Island investors who snap up real estate when its owners are behind on their taxes don’t like competing for properties with hedge funds and other deep-pocketed out-of-state companies.

So they called on state lawmakers to ban remote participation in municipal tax sales, arguing that remote financial companies that bid at these auctions prevent abandoned or underutilized urban properties from being renovated or turned into new housing. .

This local ownership movement is led by Patrick Conley, Rhode Island’s award-winning historian and tax sale king, who, by his count, has acquired 140 vacant or abandoned properties over the past 14 years.

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Patrick Conley

“The path [tax sales] were conducted [the] last two years in Providence and North Kingstown electronically, a lot of Louisiana and California hedge funds have bid,” Conley told the House Municipal Government Committee in March. need for affordable housing with a process that is detrimental to long-term slum clearance and affordable housing.”

Opposition to the bill from both sides of the political aisle

But a number of lawmakers say the tax sale process does not exist to enrich a small clique of wealthy Rhode Island insiders who have mastered the arcane and convoluted tax sale system.

Outside competition, they say, is good for owners who risk losing their property because they have fallen behind financially.

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And on Thursday, they managed to delay a planned House vote on the bill, at least for a few days.

“This is special interest legislation to prevent properties from being auctioned off so that the buyer of the tax sale gets 100% and the owner is out,” the House Republican leader said Thursday, Blake Filippi. “That’s wrong. We should be encouraging more bidding. We shouldn’t be shrinking the bidding pool. It’s hurting the owners and benefiting the special-interest insiders who are present at every tax sale.”

House GOP Leader Blake Filippi

The concerns weren’t just coming from the GOP.

House Labor Committee Chair Anastasia Williams, a Democrat from Providence, called it a “bad bill” and asked for more time to speak with the sponsor “because it’s not a good law Project”.

She got her wish and the bill is now due for a vote on Tuesday.

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Lawmakers in the House and at the previous municipal government committee hearing struggled to grasp some of the details of the tax sale process.

Conley said there were probably about six attorneys in the state who understood tax sales law.

How does a tax sale work?

A tax sale is a way for cities to collect outstanding tax debt through third-party investors, who pay it in exchange for an equity stake in the property.

Bidders must repay the entire tax debt, but they can compete on the small percentage of ownership they are willing to accept in exchange for that payment.

After the tax sale, the original owner has one year to pay the lien before the auction winner can foreclose and take the percentage of ownership stated in their bid, which can be as low as 1%.

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Conley said out-of-state investors “monopolize” the process with low bids and when they win, they do nothing with their small stake, unlike bidders who get 100% and try to redevelop.

The bill to ban remote bidding on tax sales is sponsored by House Judiciary Chairman Robert Craven, a Democrat from North Kingstown.

Representative Robert Craven, D- North Kingstown

He has no co-sponsors.

Conley was the only person to testify — either for or against the bill — at the March committee hearing.

Providence Mayor Jorge Elorza’s office did not respond to email inquiries asking if he supported him.

On Thursday, Craven explained the motivation behind the bill, saying “You have to be here and have some connection to the state of Rhode Island.”

Representative Charlene Lima, a Democrat from Cranston, defended the bill, saying maintaining local ownership is the most important issue.

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“If you get an out-of-state person or an out-of-state bank, that house ends up collapsing, boarded up, delinquent with drug addicts living in it, and you try to kick that bank out of the state…it’s impossible,” Lima said.

But Filippi said the response to landlords, whether local landlords or distant banks, failing to maintain their buildings is law enforcement, not letting local investors suck up property without competition. .

“I don’t want a few people who are all friends showing up at every tax sale and promising not to bid against each other so they all get 100%,” Filippi said.

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