I have a unique situation and need advice.

[BMoriss]

What is the name of your state (only U.S. law)? North Carolina

First of all, I apologize for the length of this, I just wanted to make sure I included all of the relevant information. Having said that, I have a pretty unique situation that I need some help with.

First, a little of the history: In 2005 I formed a partnership with a friend of mine. We went to a bank and got a commercial construction loan. We then purchased a piece of commercial land and began constructing a commercial building. This building isn’t very large (so it isn’t worth that much).

In 2007 we tried to get a second round of financing from the bank, but as you can probably guess, that didn’t happen with all of the problems going on at the time. The building was not finished. We were able to pour the concrete slab, frame it, and install a roof.

Since we could not get any more financing from around a dozen banks and investors we spoke with, we decided to stop paying the mortgage in 2008. In 2009 the bank foreclosed. We hired an attorney. However, we received a notice that the bank’s attorneys had the case dismissed without prejudice. Our attorney told us it was probably because they didn’t have a document they needed to prove that we owed money on the loan. He said they might not even have the original, signed agreement. That bank was going through a lot at the time, and there were a LOT of personnel changes, so that could be true.

Some time later the bank sold our mortgage to a collection agency. They have sent us several letters requesting payment in full, but we cannot pay it. In fact, we never made a single payment. We haven’t heard from the collection agency in years.

A few years ago the state was doing some road work near our property and had to purchase a piece of land from us. They paid us a good amount of money for this piece of land. They never said anything about the foreclosure or the collection agency.

The point is, it appears that the deed is owned by our partnership. When I look the property up online, our partnership name is listed as the owner, our deed type is a warranty deed, and the % ownership is 100.

So, here’s where I need some advice: We have also never paid property taxes on the land/building. We cannot afford to pay the taxes because each year the taxes are a lot (for us).

Half of the property taxes go to the city, and half go to the county. When I look at the tax bills for each year going back to 2006, there is a warning that states:

DELINQUENT, Foreclosure

Some state: Foreclosure Warning, DELINQUENT, Foreclosure

The tax bill for this year, 2016, states: Foreclosure Warning

We have never received any other communication from the city or county, just the tax bills every year.

My main question is: Why hasn’t the city or county foreclosed on our property?

We have several theories:

The foreclosure case was dismissed without prejudice, so maybe that is preventing the city and/or county from trying to sell the property. Maybe they are waiting for the statute of limitations to run out, which our attorney told us would be 10 years. He said that if the bank or collection agency didn’t foreclose within 10 years that we would own the property outright without having to finish paying for it.

Or, maybe they HAVE tried to sell the property, but no one wants to pay so much in back taxes for an unfinished building. But then why are we still the owners of the deed? Why isn’t the city an/or county listed as the owner?

Or, maybe since the property taxes are split between the county and city, there is something that is preventing them from acting.

So, why do you think we still own the deed and no one appears to be taking any action?

If anyone can give any advice, it would be greatly appreciated. Thanks.

 

[LdiJ]

A construction loan is not a mortgage, so its possible there was never a lien placed on the property and that is why the bank had to dismiss the foreclosure. The fact that you were able to sell some of the land without the bank getting paid tends to back up that position.

I do not understand however why the city/county have not foreclosed due to the non-payment of property taxes. I am particularly confused about how the state could buy land from you without the city/county getting paid on the overdue property taxes. That honestly makes no sense.

I also do not understand why you didn't use the money you got from the land to finish the building...but that isn't a legal issue.

I disagree however with your attorney about the statute of limitations as far as the taxes are concerned. Each year you do not pay tax becomes a brand new debt of its own. So, even if some of the debts start falling off because they become tens years old, there will always be ten years worth of debt remaining, therefore the city/county would always be able to foreclose, forever.

 

[BMoriss]

A construction loan is not a mortgage, so its possible there was never a lien placed on the property and that is why the bank had to dismiss the foreclosure. The fact that you were able to sell some of the land without the bank getting paid tends to back up that position.

I do not understand however why the city/county have not foreclosed due to the non-payment of property taxes. I am particularly confused about how the state could buy land from you without the city/county getting paid on the overdue property taxes. That honestly makes no sense.

I also do not understand why you didn't use the money you got from the land to finish the building...but that isn't a legal issue.

I disagree however with your attorney about the statute of limitations as far as the taxes are concerned. Each year you do not pay tax becomes a brand new debt of its own. So, even if some of the debts start falling off because they become tens years old, there will always be ten years worth of debt remaining, therefore the city/county would always be able to foreclose, forever.

Thanks so much for answering!

We are also quite confused about the city/county tax situation! The main reason I can offer, is because it seems that in a lot of cases (no matter what we're talking about), there are a lot of mistakes made by people. Especially people involved with city/county stuff. I don't know. But the state did buy land from us and never mentioned anything about taxes, etc. I even called the register of deeds the other day and the lady told me our partnership is the outright owner of that property. She didn't say anything about taxes, either (though I don't know if she would have anyway).

There is another thing with the taxes. As I said, we have never paid them, BUT when I was looking at the list of bills for each year, the 2009 taxes are showing as paid. And that makes zero sense as well. Also, the taxes that were due back in 2006 - 2010 were almost $1,500 MORE each year than they are now. I know that when we bought that particular piece of land, there were nearly $30,000 in back taxes owed. So basically the owners took the money we gave them for the land and used it to pay off the back taxes. That was in our agreement, that they would pay the back taxes and they did.

Some more info: Our land is nearly 4 acres. Half of it is zoned residential, the other half is commercial.

Something else that's strange is this: The tax value of our land is only around $40,000 total, but when the state bought that piece of land for the road work, they had valued our land at $70,000 PER ACRE. That's why we were able to get so much money. We sold a piece of land that was literally no bigger than 200 square feet for nearly $18,000. So it was a lot for the amount of land. Not near enough to finish the building, however.

Our attorney meant that the bank/collection company had 10 years to do something, or else they wouldn't be able to. He wasn't referring to the taxes.

At this point, I don't know what to do. Other than making some money off the state for that land, that whole project turned into a disaster. Mostly because of the financial "crisis" in 2007/2008. Obviously we know we need to pay the taxes, it's just so much money for an unfinished building we can't use. I don't know what to do...

Thanks again for discussing this.

 

[LdiJ]

Thanks so much for answering!

We are also quite confused about the city/county tax situation! The main reason I can offer, is because it seems that in a lot of cases (no matter what we're talking about), there are a lot of mistakes made by people. Especially people involved with city/county stuff. I don't know. But the state did buy land from us and never mentioned anything about taxes, etc. I even called the register of deeds the other day and the lady told me our partnership is the outright owner of that property. She didn't say anything about taxes, either (though I don't know if she would have anyway).

There is another thing with the taxes. As I said, we have never paid them, BUT when I was looking at the list of bills for each year, the 2009 taxes are showing as paid. And that makes zero sense as well. Also, the taxes that were due back in 2006 - 2010 were almost $1,500 MORE each year than they are now. I know that when we bought that particular piece of land, there were nearly $30,000 in back taxes owed. So basically the owners took the money we gave them for the land and used it to pay off the back taxes. That was in our agreement, that they would pay the back taxes and they did.

Some more info: Our land is nearly 4 acres. Half of it is zoned residential, the other half is commercial.

Something else that's strange is this: The tax value of our land is only around $40,000 total, but when the state bought that piece of land for the road work, they had valued our land at $70,000 PER ACRE. That's why we were able to get so much money. We sold a piece of land that was literally no bigger than 200 square feet for nearly $18,000. So it was a lot for the amount of land. Not near enough to finish the building, however.

Our attorney meant that the bank/collection company had 10 years to do something, or else they wouldn't be able to. He wasn't referring to the taxes.

At this point, I don't know what to do. Other than making some money off the state for that land, that whole project turned into a disaster. Mostly because of the financial "crisis" in 2007/2008. Obviously we know we need to pay the taxes, it's just so much money for an unfinished building we can't use. I don't know what to do...

Thanks again for discussing this.

You should attempt to sell the property...and then use the proceeds to pay off the taxes and the construction loan.

You could also subdivide the acreage to make at least part of it more attractive to a buyer. Separate the residential and commercial at least.

 

[BMoriss]

You should attempt to sell the property...and then use the proceeds to pay off the taxes and the construction loan.

Hi, yes that is EXACTLY what our plan was. BUT the first attorney we had when we were going through the foreclosure stuff told us we could sell it. However, after doing some research online I went to a second attorney recently and after looking at everything, he said that we "might be able to sell the property, but if the collection agency wanted to get involved they could." I say recently, but that was already nearly four years ago.

Again, thanks for taking the time to answer this question.

 

[LdiJ]

Hi, yes that is EXACTLY what our plan was. BUT the first attorney we had when we were going through the foreclosure stuff told us we could sell it. However, after doing some research online I went to a second attorney recently and after looking at everything, he said that we "might be able to sell the property, but if the collection agency wanted to get involved they could." I say recently, but that was already nearly four years ago.

Again, thanks for taking the time to answer this question.

The collection agency would have to sue the partnership and get a judgment against the partnership and then put a lien on the property in order to "get involved".

 

[BMoriss]

The collection agency would have to sue the partnership and get a judgment against the partnership and then put a lien on the property in order to "get involved".

Thanks for all of the info you provided. I think I'm going to go see about selling it now. But you can't think of any reason why the city/county hasn't done anything with 10 years of back taxes owed? We don't understand it either. Like you said it makes no sense. Do you have any kind of theory? I would really like to know why they haven't done anything.

Now that I think about it, they obviously never did anything to the original owners of the land, because they owed for nearly 20 years if I'm not mistaken.

 

[LdiJ]

Thanks for all of the info you provided. I think I'm going to go see about selling it now. But you can't think of any reason why the city/county hasn't done anything with 10 years of back taxes owed? We don't understand it either. Like you said it makes no sense. Do you have any kind of theory? I would really like to know why they haven't done anything.

Now that I think about it, they obviously never did anything to the original owners of the land, because they owed for nearly 20 years if I'm not mistaken.

The only thing that I can think of is poor management in the property tax division of your local government.