Home equity theft? How this New Bedford retiree lost her house over $10,000 in tax debt

Frank Mulligan 

Published April 26, 2022 

NEW BEDFORD — A less than $10,000 tax debt to the city led to a 66-year-old disabled retiree losing her home and more than $200,000 in equity, according to a lawsuit filed in Bristol County Superior Court.

“I still can’t believe this happened to me,” Deborah Foss said during a recent press conference announcing the lawsuit.

She went from starting an exciting new chapter in her life when she bought the property at 17-19 Valentine St. in 2015 to losing the house, all the equity, and living out of her car, she said.

Foss is being represented by the libertarian Pacific Legal Foundation, a national non-profit “that defends Americans’ liberties when threatened by government overreach and abuse,” according to its website.

The lawsuit, filed March 29, names the city of New Bedford and Tallage Davis LLC as defendants, and seeks damages, restitution, and attorneys’ fees. Tallage Davis is a real estate investment company headquartered in Boston.

According to Tallage’s website, “The company’s investment philosophy is to identify opportunities below the institutional radar that through the experience of its principals is likely to yield superior returns for the perceived market risk of the investment.”

Foss lives on a fixed income of less than $1,000 per month, and formerly worked in a coffee company’s shipping and receiving department, according to the lawsuit.

She spent her life savings and an inheritance from her mother in 2015 to buy the property for $168,500, where she lived with her wife and twin sister, according to the lawsuit.

Foss was unable to pay her property taxes in 2016 due to medical and financial problems, and the city initiated a tax taking for $3,748 in December 2016.

On June 4, 2018, the city assigned tax title, a type of lien, to Tallage for an amount that had grown to $9,626.19, including $1,361.76 in accrued interest.

By in effect selling the lien, the city gave Tallage Davis the authority under the state tax statute to collect 16% interest on the debt and foreclose on the property, according to the lawsuit.

It also gave Tallage the authority to confiscate all equity in the property if Foss failed to pay the tax debt prior to the foreclosure of the right of redemption.

Nine days after purchasing the lien, Tallage filed a complaint in Land Court against Foss to foreclose, according to the lawsuit.

Nine months later the Land Court mailed a notice of the foreclosure proceeding via certified mail to the address, which Foss didn’t receive, according to the lawsuit. The certified mail was returned as unclaimed.

She was served with notice by a deputy sheriff two months later in May 2019.

Within a month, Foss responded to the Land Court on her own, “asking the court to give her an opportunity to save her property and her life savings in her home,” according to the lawsuit.

She asked the court to establish a payment plan and give her six to 12 months to sell her home, pay her debt, and save her equity. She told the court she couldn’t pay the debt without selling her property.

Tallage motioned to strike the response because she wasn’t an attorney authorized to practice law, according to the lawsuit. The Land Court granted the motion in July 2019, and informed Foss she would have to hire an attorney.

She didn’t have the money to hire an attorney, and wasn’t able to obtain one through legal aid, according to the lawsuit. Foss also didn’t know her rights or whether she could sell the property without the court’s permission.

Foss was informed in the notice of foreclosure she needed to pay $24,394.81 to Tallage Davis to keep her home.  That total included taxes and interest levied after Tallage had purchased the lien, according to the lawsuit.

The lawsuit maintains that Foss should only have been required to pay the $9,626.19 she had owed the city, interest on that amount, and attorney’s fees.

Fighting against 'home equity theft'

The Land Court entered a default judgment in September 2019, granting absolute title to Tallage Davis. The property, which was assessed at $241,600 in 2022, was taken by Tallage Davis for an amount that had grown to approximately $30,000, including interest and attorney’s fees.

According to the lawsuit, Tallage didn’t inform Foss of the foreclosure until more than a year after the judgment, “depriving her of a reasonable opportunity to seek equitable relief in the Land Court …”

Tallage started eviction proceedings in March 2021, and she was forced to leave in February, “making her homeless in the middle of Massachusetts winter,” said PLF attorney Joshua Polk during the March 29 press conference.

Tallage then sold the property for $242,000, pocketing $232,373.81 more than it paid for the lien.

Foss has been living out of her car since the eviction, according to the lawsuit.

Polk said, “This practice, which we call home-equity theft, is cruel, unjust, and unconstitutional.”

He added during the press conference that Foss and her son had set up a GoFundMe page to raise money to find a place for her to live while the lawsuit is pending.

He added, “Massachusetts law currently allows municipalities to enrich themselves and wealthy investors at the expense of those suffering from financial hardships.”

How she became homeless

Foss said during the press conference, “I hoped that when I spent my life savings and inheritance to purchase my home in 2015 it would start an exciting new chapter in my life. But like so many others, my family is not immune to financial hardship. I had to handle repairs to the house that were more expensive than I anticipated and when my upstairs tenant stopped paying rent I was in a dire financial situation.”

She said, “I could not pay part of my 2016 tax debt so New Bedford initiated a tax taking and 18 months later the city sold the tax lien from my home to Tallage Davis for $9,626, the amount I owed the city.

“I had never heard of Tallage Davis before but now they owned my tax debts and after never sending me a bill they started foreclosing procedures on my home. During foreclosure I pleaded for a six to 12 month grace period to sell my home and  pay the full debt but the court rejected my request and foreclosed on the home in September 2019 and handed title and ownership to Tallage.

“My home was valued at around $241,000 and I owed only about $30,000 including interest and attorney fees. Instead of returning the extra $210,000 in equity I held in the home Tallage took my home and kept the equity I had in it, leaving me with absolutely nothing. This made my already dire situation much worse.”

She said, “After the foreclosure, Tallage secured an eviction against me. And this past February my worst fears came true and I became homeless. Being left homeless in the winter while still recovering from COVID was excruciating for me and is still affecting my mental and physical health. To make things worse I found out that Tallage sold my house for $242,000 and kept all the profits.”

Attorney Daniel C. Hill is representing Tallage Davis, and his office issued a press release in response to the lawsuit.

“A California-based political organization is apparently filing a lawsuit against the city of New Bedford and Tallage Davis, LLC, alleging that a judicial foreclosure decree for nonpayment of real estate taxes and subsequent liquidation of the property at 17-19 Valentine Street in New Bedford was done illegally.”

The release stated that Tallage had followed “all of the statutory requirements governing the tax lien foreclosure process …”

According to the release, they had not seen the PLF complaint and couldn’t comment.

However, the release goes on to state the property’s title was held in a real estate trust since 2015, and the trust never paid a property tax bill after it acquired the property. After several demand letters from the city went unanswered, a foreclosure complaint was filed in Land Court in June, 2018.

A hearing was held before the Land Court on July 18, 2019. The trustee of the Realty Trust, who was Foss, attended the hearing and was informed of the balance owed on the tax debt, according to the Tallage Davis release. Foss was given an opportunity to redeem the property by paying off the back taxes, or hire a lawyer to challenge the tax taking. She did neither, and was defaulted, according to the release.

It goes on to state that Tallage Davis tried to work with the property’s occupants after taking ownership in 2021 to help them relocate. An agreement was reached to vacate in exchange for a cash settlement but it was not honored, according to the release.

An oil spill was discovered in the basement in 2021, according to the release. It states remediation is ongoing and has cost Tallage Davis over $75,000 to date.

New Bedford's response

City spokesman Michael Lawrence said, “The city has no comment on pending lawsuits.”

City Councilor Hugh Dunn, however, raised the issue during a recent meeting, and urged that the city abandon the practice of selling liens to firms like Tallage Davis. “I’m not saying you can’t collect taxes, but you can’t steal home equity,” he said.

He referred the issue to the Committee on Ordinances, which he chairs.

“Number one, I want the city to stop doing it, and number two, I want to see to what extent are we engaged in home equity theft.”

Dunn added, “Frankly, the city’s goal should be to keep our residents in their homes, not to facilitate kicking them out of their homes and enriching predatory debt collectors. I can’t believe we’re doing this.”

According to a study prepared by the Pacific Legal Foundation, Tallage sold 28 New Bedford homes from 2014 to 2020 through this process. Tallage made $2,078,357 in equity over and above what it paid for the right to foreclose on them, according to the PLF study.

How Massachusetts law allows this

Massachusetts communities have the same power under state law to collect tax debts but approach collection differently.

Some communities don’t sell tax liens and rarely foreclose, “preferring to wait for homes with tax debts to be sold in a market transaction. These municipalities then collect the tax debt and interest owed from the sale proceeds, and the original owner (or the owner’s heir) receives the balance of the home’s equity,” according to the PLF study.

While the foreclosure process followed in Foss’ case is legal in Massachusetts, it’s the PLF’s stance that it violates the U.S. and Massachusetts constitutions. That’s because government doesn’t have the right to take someone’s home and equity beyond what’s owed. Homeowners have a right to just compensation and freedom from excessive fines.

According to the study, Massachusetts is one of a dozen states that allow this practice.

House Bill 3053 was filed in the state Legislature in March 2021, and would require tax lien holders to auction foreclosed property to the highest bidder, and then follow traditional mortgage foreclosures by applying the proceeds to the tax debt and other liens first, then paying what’s left to the original homeowners.