I know you are getting sick and tired of hearing about Act 93, but I have news.

Examined a title in Somerset County yesterday and we have our first transaction impacted by Act 93 of 2013.  Our seller owns 5 properties in the county that have delinquent taxes owing for 2012 and 2013.

Since the 2013 taxes haven't yet reached the "claim absolute" stage, we aren't concerning ourselves with them.  The 2012 taxes, however, are claims absolute and therefore are "reduced to judgment" and must be paid in order to clear the title for our buyers.

Total additional tab to our sellers?  They are paying roughly $6000 to clear 2012 taxes on the 4 extra properties so that they can convey the 1 property to our insured buyer.

We can mark this one as a win for the municipality since the deal did not fall thru.  The sellers are elderly and own the property free and clear.

another unintended consequence of Act 93 of 2013

As we have discussed in previous posts, PA Act 93 of 2013 creates a system by which municipalities can file personal judgments against property owners who also have in rem delinquent property tax liens. I have been arguing that this new law will set in motion a whole lot of unintended consequences never envisioned by lawmakers.

Here's another one.  HOW DO JUDGMENTS IMPACT FICO SCORES?

Google that and you'll find that personal judgments are found in the FICO process and impact FICO scores, even when the judgment has been paid.  If you have a bad debt and a judgment related to one incident, they both impact the FICO score so theoretically if FICO has the ability to see an in rem property tax lien - possible in some counties - and also sees the Act 93 personal judgment, the property tax obligation has a two stage punch on the property owner's FICO score.

Judgments, whether satisfied or not, impact FICO and sit on a credit report for up to 7 years.

QUESTION:  How will lawmakers react when constituents start calling to say they can't get a new mortgage because Act 93 judgments - even if paid - are sitting out there lowering their credit scores?

Thus far most of my arguments against Act 93 of 2013 have been on behalf of consumers who own more than one property.  This FICO angle is a concern for EVERY property owner who gets into temporary financial difficulty.  Who doesn't know someone who had a bad financial set back beyond their control?  If a consumer gets behind on their property taxes for more than one year in PA, even if they pay the tax in the second year, their FICO credit score moving forward for the next SEVEN years will be lower.

Lower FICO credit scores .... what are the long term consequences?

Act 93 of 2013 was born in good intentions but the more we think about it the worse it looks, eh?

PAR article on Act 93

Confusion regarding a recently signed bill has created some misunderstandings about how it will affect real estate and transactions.

“Act 93, originally House Bill 388 (Parker, D-Philadelphia), only changed how municipalities reduce property tax claims and tax liens to a final judgment in that county,” said PAR legal counsel Brett Woodburn. “As a result, municipalities no longer have to incur the expense of suing delinquent property owners to get a final judgment. This really expands the arsenal of weapons that municipalities have at their disposal to collect delinquent taxes and fees.

http://www.parjustlisted.com/archives/20537/comment-page-1#comment-2867

Be sure to read the comments.  Here is my response to Brett Woodburn's comment:

I agree that the laws enforcing money judgments have not changed. Presuming - as I have been told - that municipalities are on board and filing money judgments against delinquent property owners, what we have is a massive new overlay of money judgments attaching to real property.  It does not take an execution of a money judgment to make the judgment attach to real property.  It automatically attaches.  While these liens are attached to parcels, they cannot be refinanced or conveyed with good title until the liens are satisfied.  The unintended impact of Act 93 is to make distressed properties harder to sell, and in some cases impossible to sell.

The unintended consequence of allowing municipalities to forego the thought process involved in suing for final judgment is to take out of the mix review by the court and an opportunity for defense by the property owner.  The old system might have been costly and time consuming for municipalities, however, review by a competent attorney prior to filing suit would help municipalities consider which individual collection circumstances would be helped by the filing of such money judgments and which would be impeded.