As we've discussed previously, D.C.'s tax-lien program can result in homeowners losing their homes because of liens bought by private companies where the delinquency was only a few hundred dollars. The Post published a fabulous investigative piece (this link is to the first of the three-part series), and the D.C. officials have promised reform.
Now, as the Post reports, the prominent D.C. law firm Boies, Schiller & Flexner has filed a class action lawsuit on behalf of Bennie Coleman, one of the homeowners profiled in the Post series who was victimized by the tax-lien system. Mr. Coleman, a retired Marine sergeant, had his home foreclosed on because of an unpaid $134 tax bill that snowballed after the D.C. government hit him with $183 in penalties, and a private company, Embassy Tax Services, bought the lien from D.C. and demanded Mr. Coleman pay an additional $5000 in penalties, interest, and fees, according to the complaint filed this week in federal court here in D.C. The suit explains how Embassy obtained the deed to the house via court order and sold it for $71,000 (the complaint estimates the fair market value of the home at $200,000) — none of which Mr. Coleman received.
The class action asserts that the D.C tax lien system amounts to an unconstitutional taking of Mr. Coleman's property in violation of the Fifth Amendment.
This could be an influential test case to determine how far governments and corporations can go to enforce a tax lien and whether there are constitutional protections for homeowners. In this case, not only did Embassy turn a $300 problem into a $5000 problem but, worse, D.C. let Embassy pocket the difference between the amount it asserted Mr. Coleman owed and the value of the home — a huge windfall for the company, all at Mr. Coleman's expense.