Tax-default law inspired by Imperial County court case on governor’s desk
SACRAMENTO — A legal loophole currently preventing the auction of properties in tax default will be closed if a bill awaiting signature by Gov. Jerry Brown is signed into law.
Assembly Bill 2746, authored by Assemblyman Eduardo Garcia, D-56th District, was passed in the state Senate on Aug. 13, and in the Assembly on Aug. 20. Garcia penned the bill after the auction of a property in default in Imperial County was halted when the property owner declared bankruptcy. The bill would prevent a declaration of bankruptcy after a certain date from halting such an auction.
“The County of Imperial asked that I carry AB 2746 in order to clarify the California tax code to enable treasurer-tax collectors throughout the state to continue their tax sale process, without being impaired if a bankruptcy is filed after the right of redemption has expired,” Garcia said in a press release. “These amendments will help save counties, like Imperial, from unnecessary litigation expenses.”
The county spent about $90,000 on legal fees associated with that bankruptcy court case, according to County Treasurer-Tax Collector Karen Vogel.
The bill addresses a conflict that arose from this court case in relation to the right of redemption for tax-defaulted property sales, which has created substantial concern for treasurer-tax collectors throughout California, according to background information provided by Garcia’s communications staffers.
The right of redemption refers to a five-year window from the time a property owner fails to pay property taxes in California — including interest, penalties and costs resulting from the delinquency — and the date when the defaulted property becomes eligible for auction by the county in which it is located, allowing the government to recoup the losses it is owed.
Owners of properties in tax default lose the right to redeem their property if they have not paid the outstanding balance by the close of business on the last business day prior to the sale date, according to California Revised Tax code 3706.