The Commonwealth Court was asked to weigh in on whether a purchaser of real estate at an upset sale for unpaid taxes was responsible for paying taxes that accrue between the date of purchase at upset sale and the date the deed was conveyed.  In affirming the lower court’s determination, the court held that the purchaser was responsible for such taxes.

Vivid Autumn foliage is reflected in a still lake in the golden hour, with periwinkle sky. Image created at Nockamixon State Park in Quakertown, Bucks County, Pennsylvania. "Nockamixon" may mean "in the place or soft soil" in the Lenni Lenape language. DSLR image at low ISO captures magnificent fall color warmth in a horizontal format late in the day. No people. Copy space.

Petitioners were limited liability corporations that purchase real estate through tax sales.  Nine properties purchased by Petitioners at upset tax sales accrued $34,500 in taxes between the date of purchase and the date the deed was finally transferred over to them.  Petitioners filed motions to strike tax liability owed on those nine properties, especially where the properties were purchased in one tax year and conveyed in another. The Court of Common Pleas of Lackawanna County denied the petition and Petitioners appealed.

On appeal, the Commonwealth Court affirmed the trial court’s order.  It began its analysis by distinguishing the three different types of tax sales: upset sales, judicial sales, and private sales.  Specifically, the court highlighted the fact that court approval for judicial and private sales was granted prior to the sale, while for upset sales, approval was not granted until after the sale had already occurred.  The court also pointed to the fact that statutorily a taxing authority was permitted to dispose of properties through judicial and private sales free and clear of all encumbrances, while an upset sale could only be sold free of those items included in the upset price.  As the specific properties at issue had been sold at upset sale, there was no authority to abate the taxes on these properties, as subsequent unpaid taxes were not included in the upset price calculation.

Click here to read: In Re Balaji Investments, LLC, 2294 CD 2015 (Pa. Commw. Ct. Oct. 6, 2016).

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