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Legal Notes Blog > January 2014

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By Robert Potrzebowski, President
                There has been much recent writing and discussion regarding the large number of tax foreclosures the City of Milwaukee (the City) is forced to file each year, resulting in its (undesired) ownership of many parcels of real estate. What is less well known is the fact that the City has actually taken some creative and unique actions to mitigate this problem, which could’ve been much worse. For example, some years ago the City decided to utilize a little known and even less used Wisconsin statute to better attempt to collect back taxes prior to foreclosure. Then, just last year it expanded that initiative. The Kohn Law Firm (KLF) has been an integral part of those efforts.
                Tax foreclosure is a type of “in rem” legal action – an action against the property itself. For the vast majority of municipalities for many years, foreclosure has been the only form of legal action utilized to recover tax delinquencies. But in 2001, the City initiated a pilot program that relied upon a somewhat obscure Wisconsin statute that also allows for “in personam” actions – actions against the person – to recover back taxes. Instead of just foreclosing on all tax delinquent properties, the City decided to first attempt to recover those taxes from the property owners by utilizing that statute and the services of KLF, with whom the City already had a longstanding relationship. KLF’s initial directive was to contact those owners and attempt to work out voluntary payment arrangements. If those efforts failed and KLF was able to identify opportunities for involuntary collection via legal remedies, the City authorized the filing of an “in personam” action against the owner for the purpose of obtaining a money judgment and effectuating those remedies.  
The pilot program was an immediate success, and soon thereafter the City began referring all real property tax delinquencies to KLF for this type of treatment prior to foreclosure. That success wasn’t measured simply by increased tax recoveries. It was also evident in the form of considerably less foreclosure actions and considerably more City residents and businesses retaining ownership of their property. In many instances those property owners needed either the impetus of third-party intervention and/or the opportunity to enter into a monitored and enforced payment arrangement to avoid falling so far behind that full redemption in the context of a foreclosure action would be impossible.
Unfortunately, even with this extra effort by the City, the subsequent financial crisis caused a new increase in the number of tax foreclosures. As a result, late in 2013 the City took another action intended to keep property owners in their homes and businesses – it began referring tax delinquencies to KLF five months earlier in the collection process. The City’s intent is not simply to become more strict or aggressive in its collection efforts. Instead, its objective is to give delinquent taxpayers the opportunity to enter into longer payment plans to avoid foreclosure, as well as give KLF more time to contact and attempt to work out such arrangements. In other words, the City now has more time to utilize legal collection remedies other than foreclosure. The final results of this decision remain to be seen, but there is little doubt that it will reduce tax foreclosures.
KLF has been involved in all of these efforts not only in the provision of collection and legal services, but also in the process of designing and tailoring the City’s approach to its foreclosure problem. Therefore, KLF is proud of its role in assisting the City from a civic perspective.
Posted: 1/20/2014 8:23:09 AM by | with 0 comments