There are two main types of sheriff sales in Philadelphia, PA: mortgage foreclosure sheriff sales and tax lien sheriff sales. While mortgage foreclosure sales are often final, tax lien sales can create problems for purchasers. At a tax lien sale the Office of the Sheriff of Philadelphia sells the property to collect on unpaid taxes, water or electric utilities. These properties are often sold at a fraction of their actual value. Investors are rightfully leery to purchase properties because prior owners of a Right of Redemption.
Owner has 9 Months to File the Petition
53 P.S. Section 7293 governs Right of Redemption in Pennsylvania. Under the statute, a property that is sold at tax lien sheriff sale can be essentially bought back by the prior owner of the property within nine months of the recording of the sheriff’s deed. The prior owner must pay the purchase price at the sheriff sale, plus ten percent to the new purchaser. The prior owner is also responsible for necessary expenses during the purchaser’s ownership period. For example, if the purchaser paid taxes or necessary renovations to the property the prior owner may have to compensate the purchaser for these expenses. The statue broadly defines the prior owner to include, “the owner… his assignees, or any party whose estate has been discharged thereby.” For example, this may include a son of a father who died without a will. A redemption is initiated by filing a petition for redemption in the Philadelphia Court of Common Pleas.
The Property Must be Occupied
For a redemption petition to be granted, the prior owner must establish the prior was occupied at least ninety days prior to the sheriff sale. Vacant property cannot be repurchased. Pursuant to the law there shall be, “no redemption of vacant property by any person after the date of the acknowledgement of the sheriff’s deed therefore.” The interested party must file a petition for redemption with nine months of recording of the sheriff’s deed, and serve all interested parties. The prospective redeemer must also have in escrow the purchase price of the redeemed property and ten percent interest. Our firm has successfully defended cases where a redemption action is brought to redeem a vacant property. If the purchaser can establish through evidence (i.e., photos, city violations, etc.) that the property was abandoned and/or uninhabitable then redemption should be denied and the purchaser should retain possession.
Owner Must Compensate the Purchaser
The prior owner is responsible for compensating the purchaser for the price of the property at sheriff sale, plus ten percent and necessary expenses. In order to grant redemption the court must be assured that prior owner has the funds to redeem. Often times the owner lost the property because of financial problems. Per 53 P.S. Section 7293 the owner is responsible for necessary improvements to the property. At the redemption hearing the burden is on the petitioner to show the funds are available to buy back the property from the purchaser. If the petitioner does not have the funds they cannot redeem the property. If the petition for redemption is denied the investor will keep their property at the purchase paid at sheriff sale.
Owner Must Serve the Purchaser
Another common defense to the petition to redeem is lack of knowledge. Petitioner’s may file a petition to redeem and serve the City of Philadelphia. The Courts usually require the third-party purchaser be served with the petition since he has an interest in the property. If the prior owner fails to serve the purchaser with the redemption petition the court will not grant the redemption. The court must hear from the purchaser concerning necessary expenses and redemption price before adjudicating on a petition to redeem.
Petitioner Must Prove Ownership
Petitioner for redemption are only eligible for people with an ownership interest prior to the sale. If the petitioner is not listed on the deed to the property or cannot establish an ownership interest they have nor right to redemption. Therefore, a purchaser may defend a redemption action by challenging the petitioner’s interest in the property.
Our firm has successfully litigated a number of redemption actions for purchasers. In one recent case, S.P. purchased a property at sheriff sale. He invested thousands of dollars into the property making improvements, and proceeded to rent the property to tenants. Upon learning of the improved value of the property, heirs to the prior owners estate filed a petition for redemption. S.P. was not served with redemption papers and only discovered of the action after the prior owners broke into the property to re-establish possession. S.P. contacted our office to defend the redemption action. At the time our firm was retained the petition to redeem was already granted. Our firm filed a petition to intervene and named S.P.’s business as a party to the action. We then answered the petition to redeem challenging the petitioners standing to bring the claim. In the alternative, we argued that even if the Court allows the heirs to redeem they must compensate S.P. for improvements made pursuant to Section 7293, which provides compensation for “necessary expenses.” In Court, the judge raised the redemption price more than 100%. Petitioners now have thirty (30) days to pay S.P. in excess of $50,000.00 or waive their right of redemption. The property was purchased at sheriff sale for $24,000.00. If you have purchased a property at sheriff sale, contact our office to defend a petition for redemption. While you may not be able to save the property, you can take action to ensure you a rightfully compensated for any necessary expenses of the property, including the redemption price and ten percent interest.