If you are a personal representative in charge of an abandoned property or bankruptcy, it may be in your best interest to find a way to sell it. Selling an abandoned property is often difficult because of the location and/or state of the property. However, local governments may have additional obstacles beyond those in an attempt to control the neighborhood. They openly created disincentives for leaving the properties vacant, penalizing those who let their properties fall into such a state of disrepair and become a blight on the neighborhood. Although the reasons are understandable, it works against individuals trying to do the right thing and divest themselves of a property they truly don’t have the resources to care for. Some urban areas have a particularly large number of abandoned properties. Here are some examples of obstacles and disincentives used by Washington, D.C., Maryland, and Virginia.
Requiring an extra tax as a kind of punishment is considered experimental, as we don’t know the full impact of these measures yet. D.C.’s Department of Consumer and Regulatory Affairs (DCRA) currently taxes vacant properties 5% percent extra, and 10% extra if it is determined that those properties are blighted; the law allows for some exceptions—such as those owned by the federal government or that are under construction. There is also an exception if the owner can prove that the property is on the market for rent or sale and a rarely-granted exemption for financial hardship.
These and other exemptions are subject to time limits and are subject to appeal by the homeowner. There is confusion among homeowners about the qualifications and new legislation which will put the burden on the homeowner to prove that a property is even occupied. The new rules would also cut downtime limits for some exemptions and penalize those who fail to list their unoccupied properties as being so. The law as it stands puts in an impossible burden on DCRA for maintaining a list of properties, but also adds in a rebate for those who comply with the regulations and then manage to fill their vacant properties within a year.
Property taxes in Maryland are determined locally. Maryland offers a homestead exemption, and local jurisdictions offer some other tax incentives for occupied real property (although an investigation discovered that many vacant properties mistakenly get those credits). Strict rules about tax arrearages owed have contributed to the problem in Maryland, but a tax credit in Baltimore for taking over an abandoned property is a major incentive as it offers up to 100% reimbursement under certain conditions. Many local jurisdictions require owners to register vacant property, but the requirements are not as restrictive as those in DC. For instance, many require a $50 fee, with registration occurring within 30 days of a foreclosure sale.
Virginia real property taxes are surprisingly low, although the amounts owed are still high because of the high property values. Residents can take advantage of homestead exemptions, both state and federal, for both tax and bankruptcy purposes. Some local jurisdictions have enacted laws that penalize vacant property owners, although the effects are nominal compared to D.C.’s stricter policy. Charlottesville, for instance, has a requirement to register a vacant property within 365 days, but the fee is only $25.