In this case out of Philadelphia, the Commonwealth Court was asked to weigh in on a redemption action to reclaim a property sold at a tax sale. In affirming the lower court’s decision, the Commonwealth Court ruled on when a property is considered “vacant property” under the Municipal Claims and Tax Liens Act (the Act) such that it cannot be redeemed after the deed is acknowledged by the Sherriff, and what the time limitations are for making the final payment to redeem a property.
KT Management (KT) purchased a rental property at sheriff’s sale for $90,000 in March 2014. The prior owner, Philadelphia Scrapyard Properties (Scrapyard), had fallen behind on its tax payments, and the property had been exposed to a tax sale. Two months later Scrapyard filed a Petition to redeem. KT intervened and filed an answer arguing that one of the six lessors of the Property had moved out and a new lessor had moved in, resulting in the residence not having been occupied by the same “basic family unit” for 90 days prior to the transfer of the deed. As such, the property should be considered a “vacant property” under the terms of the Act and could not be redeemed after the date of the acknowledgment of the sheriff’s deed.
In November 2014, the Court of Common Pleas of Philadelphia County approved a stipulation granting the Petition to Redeem, ordering the Sheriff to release $73,433.72 it was holding to KT, ordering Scrapyard to pay KT $23,694.36 within 7 business days, and ordering KT to re-convey title to Scrapyard. The $23,694.36 owed to KT included the cost of its repairs to the property, plus the purchase price, and 10% interest; less the refund from the Sheriff, and the rents KT had received. KT also retained its right to appeal.
KT appealed; however, while the appeal was pending, KT also filed a Petition to Remand based on Scrapyard’s failure to comply with the stipulation. KT asserted that Scrapyard had failed to comply by not paying within 7 days and could no longer redeem the property because 9 months had elapsed from the date the deed had been acknowledged and no final payment had been made. Remand was granted and the trial court held a new evidentiary hearing. At this hearing Scrapyard asserted it had not paid because the Sheriff had failed to timely release the funds, and, when it later attempted to settle, KT had refused to accept the check until certain leasing commissions were included in the redemption cost. KT asserted Scrapyard’s failure to pay indicated an inability to pay and thus an inability to redeem the property. The trial court held that Scrapyard had not failed to comply with the stipulation because the Sherriff had delayed releasing the funds and excluded the leasing commissions from the redemption cost. KT again appealed.
On appeal the Commonwealth Court affirmed the lower court’s determinations. It held that the property was “vacant property” under the Act simply because 1 of 6 college student tenants had changed. Rather a “basic family unit” was defined as the fundamental part of a group of individuals living under one roof. Because 5 of the 6 tenants had remained, the basic family unit had remained the same. Additionally, the court held that Scrapyard’s failure to pay the redemption cost within 9 months of the date of acknowledgment did not prevent them from redeeming the property. This 9 month limitation, the court determined, only required the redemption process begin within this time, not that final payment be made. Further, Scrapyard’s failure to pay was not, itself, evidence of an inability to pay, because the Sherriff’s failure to release the funds had prevented the parties from complying with the stipulation.