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Karl A. Racine
Office of the Attorney General for the District of Columbia

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DC Court of Appeals Rules for District Homeowners on Redeeming Properties Subject to Foreclosure

Thursday, February 6, 2014

Ted Gest, Public Information Officer
[email protected]

WASHINGTON, D. C. – Upholding the arguments of the D.C. Attorney General’s office and rejecting those of an out-of-town wholesale tax sale purchaser, the D.C. Court of Appeals ruled today in a way that protects District homeowners whose properties are subject to foreclosure and requires tax sale purchasers to dismiss foreclosure actions before they may be reimbursed for their purchases, announced D.C. Attorney General Irvin B. Nathan.

The court ruled in a case involving Aeon Financial, LLC, which was a high-volume purchaser at several tax sales held by the District.  In hundreds of its cases, Aeon argued that because the District did not collect interest from homeowners that should have accrued between the date on which the homeowner paid  taxes and the date on which the homeowner reimbursed Aeon for its reasonable legal expenses, the homeowners had not redeemed their properties and Aeon was entitled to foreclose unless the additional interest and any newly-arising legal expenses were paid by the homeowner or until the District cancelled the sales. Sale cancellation would have required the District to pay Aeon millions of dollars in additional interest and legal fees.

In a unanimous decision of a three-judge panel, written by Judge Roy McLeese,  the court rejected Aeon’s arguments, holding that taxes are considered paid for tax sale redemption purposes when the homeowner in good faith pays all amounts billed by the District, even if the District makes a mistake in calculating the tax amount.  Therefore, the court concluded, a homeowner redeems property when all taxes billed by the District are paid and, if a foreclosure complaint has been filed, the homeowner has fully reimbursed the tax sale purchaser for its reasonable legal expenses.

The court also upheld the District’s practice of absorbing any additional interest that accrues if there is a delay in paying legal expenses, and rejected Aeon’s argument that the properties are not redeemed until the District collected this small amount of additional interest from homeowners.  

Mayor  Vincent C. Gray said, “I am delighted that today’s court ruling protects the interests of home-owning District taxpayers against the unscrupulous practices of some tax lien purchasers. I applaud the Attorney General and the attorneys in his office for their work on this case.”

Attorney General Nathan said that the opinion “reinforces that tax sale purchasers may not use hyper-technical readings of the statute to put District homeowners at risk of foreclosure or to obtain refund payments from the District in excess of what the statute reasonably allows.  The decision upholds the District’s administrative practices dealing with tax sales and provides certainty to homeowners who seek to redeem their properties.”

The Attorney General commended James McKay of the Office of the Solicitor General for his handling of the appeal in this matter and OAG attorneys David Bradley and Eli Wood for their handling of this matter in the Superior Court.