30 May Virginia Legislative Update
The Virginia legislature recently amended its laws affecting tenants in a dwelling unit that is subject to foreclosure, and those laws related to real property tax and non-judicial sale of tax delinquent property. All the legislation referenced in this memorandum is effective July 1, 2017.
Virginia House Bill 1623 and Senate Bill 991
Under the current law, if a dwelling unit is foreclosed upon and there is a tenant lawfully residing in the unit on the date of foreclosure, the tenant is permitted to remain in accordance with the federal Protecting Tenants at Foreclosure Act, which expired December 31, 2014.
The amended law provides that the foreclosure acts as a termination of the rental agreement with the foreclosed-upon owner; however, the tenant may remain in possession of the dwelling unit as a month-to-month tenant on the terms of the terminated rental agreement until the successor owner gives a notice of termination of such month-to-month tenancy. The successor owner must give written notice of a termination in accordance with the rental agreement or with state law provisions.
Unless the successor owner terminates the month-to-month tenancy, the terms of the terminated rental agreement remain in effect except that the tenant shall make rental payments:
- To the successor owner as directed in a written notice to the tenant;
- To the managing agent of the owner, if any, or successor owner; or
- Into a court escrow account pursuant to state law.
The successor owner may enter into a new rental agreement with the tenant; in this case, upon the commencement date of the new rental agreement, the month-to-month tenancy terminates.
Virginia House Bill 1909
Notwithstanding any other provision, the treasurer or other officer responsible for collecting taxes may sell, at public auction, any unimproved parcel of real property that is assessed at less than $5,000 (previously $10,000), provided that the taxes on such parcel are delinquent on December 31st following the third anniversary of the date on which such taxes have become due.
The treasurer or other officer responsible for collecting taxes may, in addition, sell at public auction any parcel of real property that is assessed at no less than $5,000 but less than $20,000, provided that the taxes on such parcel are delinquent on December 31st following the third anniversary of the date on which such taxes have become due, it is not subject to a recorded mortgage or deed of trust lien, and such parcel:
- Is unimproved and measures less than 4,000 square feet (.0918 acre);
- Is unimproved and is determined to be unsuitable for building due to the size, shape, zoning, floodway, or other environmental designations of the parcel made by the locality’s zoning administrator or other official designated by the locality to administer its zoning ordinance and carry out the required duties;
- Has a structure on it that has been condemned by the local building official;
- Has been declared a nuisance by the locality;
- Contains a derelict building; or
- Has been declared to be blighted by the locality.
At least 30 days prior to conducting a sale as provided above, the treasurer or other officer responsible for collecting taxes must:
- Send notice by certified or registered mail to the record owner or owners of such property and anyone appearing to have an interest in the property at their last known address as contained in the records of the treasurer or other officer responsible for collecting taxes; and
- Post notice of such sale at the property location if such property has frontage on any public or private street, and at the circuit courthouse of the locality.
The treasurer or other officer responsible for collecting taxes must also cause a notice of sale to be published in the legal classified section of a newspaper of general circulation in the locality in which the property is located at least 7 days but no more than 21 days prior to the sale; however, if the annual taxes assessed on the property are less than $500, such notice may be placed, in lieu of publication, on the treasurer’s or local government’s website beginning at least 21 days prior to sale and through the date of sale.
The owner of any property, or other interested party, may redeem it at any time prior to the date of the sale by paying all accumulated taxes, penalties, interest, and costs thereon, including reasonable attorney fees. Partial payment of delinquent taxes, penalties, interest, or costs are insufficient to redeem the property and will not operate to suspend, invalidate, or nullify any sale.
At the time of sale, the treasurer or other officer responsible for collecting taxes will sell to the highest bidder at public auction each parcel that has not been redeemed by the owner. Such sale will be free and clear of the locality’s tax lien, but does not affect easements or other rights of record recorded prior to the date of sale or liens recorded prior to the date of sale unless the treasurer has given the lienholder written notice of the sale at least 30 days prior to the sale, at the lienholder’s address of record and through his registered agent, if any. The treasurer or other officer responsible for collecting taxes must tender a special warranty deed to effectuate the conveyance of the parcel to the highest bidder.
If the sale proceeds are insufficient to pay the amounts owed in full, the treasurer or other officer responsible for collecting taxes may remove the unpaid taxes from the books and mark the same as satisfied. The sale proceeds must be applied first to the costs of sale, then to the taxes, penalty, interest, and fees due on the parcel, and thereafter to any other taxes or other charges owed by the former owner to the jurisdiction.
Any excess proceeds will remain the property of the former owner, subject to claims of creditors, and will be kept by the treasurer or other officer responsible for collecting taxes in an interest-bearing escrow account. If any petition for excess proceeds is made to the treasurer or other officer responsible for collecting taxes, the treasurer or officer holding the funds must forward the funds to the locality’s circuit court clerk to be impleaded along with a copy of the claim for excess proceeds. A copy of such transmission must be forwarded to the claimant. The burden of scheduling a hearing with the circuit court on the claim is that of the claimant and must be made within 2 years of the date of the sale of the property that generated the excess funds. In the event that funds remain with the court years after the dale of the sale, the locality may petition to have the funds distributed to the locality’s general fund. If no claim for payment of excess proceeds is made within two years after the date of sale, the treasurer or other responsible officer must deposit the excess proceeds in the jurisdiction’s general fund.
If the sale does not produce a successful bidder, the treasurer or other responsible officer must add the costs of sale incurred by the jurisdiction to the delinquent real estate account.