If you are considering buying a property at a Philadelphia tax foreclosure auction, there is one important procedure to be aware of—the redemption period. We highlighted this matter in a previous post where we discussed the basics of purchasing properties at Philadelphia foreclosure auctions. Here, we will dive further into what the redemption period is, when there are exceptions, and how recent cases have affected when redemption is available.
THE BASICS
The right to redemption is governed by 53 P.S. § 7293, which provides, in part, that “[t]he owner of any property sold under a tax or municipal claim, or his assignees, or any party whose lien or estate has been discharged thereby, may . . . redeem the same at any time within nine months from the date of the acknowledgment of the sheriff’s deed therefore, upon payment . . . .”
Who can redeem: As indicated in the applicable statute, it is possible that multiple parties would have a right to redemption on the same property. The law provides that either (1) the owner, (2) the owner’s assignees, or (3) any party whose lien or estate has been discharged by the sale may redeem the property. The owner will have the right over any creditors to redeem, provided the owner also pays the creditor’s claim in full. If multiple creditors wish to redeem, the creditor lowest in lien has the first right over creditors higher in lien. These parties can also redeem from each other, provided that they act within the original nine-month period.
Payment required: In order to exercise the right to redemption, the interested party (owner, assignee, or lienholder) will have to cover what the winning bidder paid, and additionally, satisfy all of the unpaid back taxes on the property. The law sets forth the required payments as (1) the amount of the bid, (2) the cost of the sheriff’s deed, (3) all taxes and municipal claims, (4) the principal and interest of estates and encumbrances not discharged by the sale, (5) insurance, (6) other charges and necessary expenses of the property, and (7) interest. Once the party satisfies all of these payments, they will be able to retake possession of the property.
THE EXCEPTION
Section (c) of the applicable statute provides an important exception to the right of redemption; a vacant property is not eligible for redemption “by any person after the date of the acknowledgement of the sheriff’s deed.” The statute stipulates that property will be considered vacant “unless it was continuously occupied by the same individual or basic family unit as a residence for at least ninety days prior to the date of the sale and continues to be so occupied on the date of the acknowledgment of the sheriff’s deed therefor.” Consequently, this provision limits the availability of redemption when the same person or family has not continuously resided at the property.
Two recent cases have clarified when this section will apply and when it will not. First, in City of Philadelphia v. F.A. Realty Investors Corp., decided in 2014, the Commonwealth Court of Pennsylvania held that an eligible party could file its petition to redeem prior to the acknowledgement of the sheriff’s deed and did not have to wait to redeem until after the sheriff’s deed was acknowledged. 53 P.S. § 7293(c) disallows redemption of vacant property after the date the sheriff’s deed is acknowledged. Ultimately, this case clarified that “a petition to redeem premises is both permitted and timely filed for vacant and non-vacant property prior to the acknowledgement of the sheriff’s deed.” This decision has provided a brief window of time where an owner of vacant property still has the opportunity to exercise their right to redemption.
Next, City of Philadelphia v. Philadelphia Scrapyard Properties, LLC, decided by the Commonwealth Court of Pennsylvania in 2016, clarified that the term “basic family unit” is not limited to what you might consider to be a traditional family, and that this unit does not even have to remain fully intact for the term to apply. This case involved six college students, one of which subleased his interest to another student without the landlord’s knowledge. The Court held that the term “basic family unit” could be interpreted as “the fundamental part of a group of individuals living under one roof,” and concluded that the change of one individual did not result in the property becoming vacant. The case also clarified that the redeeming party is only required to show an ability to pay and to begin the redemption process within nine months, and is not required to complete the process and all payments in that timeframe.
CONCLUSION: WHAT THIS ALL MEANS
For anybody considering purchasing a property at a Philadelphia foreclosure auction, you should be aware of the redemption period and how it could affect your purchase. For example, it is likely not a good idea to take on any obligations relating to the property or to invest any substantial amount of money into the property before this nine-month period passes. On the other hand, if you are the subject of a tax foreclosure these recent developments mean that there may be avenues to redemption which were not previously available. If you have questions regarding redemptions, contact our offices at 215-717-2200 or here.