‘Legal ripoff’? Nebraska makes it easier for investors to take farms, homes for unpaid taxes
LINCOLN — The 73-year-old disabled veteran still struggles to understand how he arrived on the verge of homelessness over $500.
It’s not like he didn’t have the money. That’s what haunts L.E. Moss — he could have afforded to pay the half a year in delinquent property taxes.
Moss and his wife always tried to keep an emergency fund to help with the unexpected costs of raising children, recovering from heart surgery and repairing the converted country school near Ravenna where they have lived for 31 years.
But, he said, he didn’t get a chance to use those funds before a letter arrived saying their home had already been obtained by a Lincoln lawyer through what’s called a treasurer’s tax deed. Billed as a more cost-effective alternative to foreclosure, the system allows private investors to acquire properties that are behind on taxes, often for pennies on the dollar.
Even though the law requires official notices of the impending deed transfer to be mailed to property owners, Moss said he never saw any until it was too late.
“It’s nothing but a legal rip-off,” said Moss, who has sued to keep his home. “That’s how I feel about it. We’ve been here for 31 years, and they’re going to screw me out of the property for $500 when I had the money at hand.”
Six years ago, the Nebraska Legislature passed a law intended to give property owners clearer notice when they were in danger of losing their homes or farms to tax deed sales. The 2012 law required buyers of the deeds to deliver pertinent documents to the owner in an envelope stating “UNLESS YOU ACT YOU WILL LOSE THIS PROPERTY” in 16-point type.
But people like Moss never received a warning envelope. That’s because the enhanced notice requirements were put on temporary hold by lawmakers in 2014 and again in 2017.
What’s more, the push to shelve the warning envelopes came from the same lawyer who now stands to acquire a home and acreage worth $60,000 for $500 in back taxes plus interest.
That lawyer, Randy James, has spent more on lobbying the Legislature over the past six years — $75,000 — than the Moss home is worth.
James owns a tax deed company called Vandelay Investments LLC. He did not respond to repeated emails and voice mails seeking comment, and his law firm lists only a Lincoln post office box for an address.
But a lobbyist hired by James said the notification provisions used by Vandelay are more than adequate to alert property owners, especially when combined with notices mailed out by the counties.
Vandelay Investments is one of several firms that buys tax certificates in Nebraska. A search of the company’s name in a public court database pulled up almost 1,100 records.
It’s unclear if the name of James’ company was inspired by a “Seinfeld” episode in which George Costanza made up a “Vandelay Industries” to game the unemployment system.
But James’ business gained public attention last summer when the Nebraska Supreme Court ruled in his favor in a high-stakes case. The court allowed James to keep a Lincoln County farm worth $1.1 million that he paid $50,000 to acquire, even though it wasn’t clear if the 94-year-old woman who owned the property ever received the notice Vandelay had mailed.
The Supreme Court majority said James complied with the letter of the law. But one judge disagreed, saying the majority’s failure to consider the advanced age of the property owner allowed James to reap “a windfall that borders on the obscene.”
The intent of the notification requirements is to protect the due process rights of citizens, ensuring that they do not have their properties taken without an opportunity to contest the taking. The goal for counties is to get people to stay current on their taxes.
From start to finish, the process takes three years. Property owners are to receive notices from their counties in addition to the final notice from the tax deed buyer.
In 2012, lawmakers took steps to eliminate the option of treasurer’s tax deeds in favor of a system that allowed only judicial foreclosures. At a public hearing, six people testified in support of the repeal bill, including representatives of banks, credit unions, land title companies and the Douglas County Treasurer’s Office.
But when the measure reached the floor for debate, a couple of senators balked. They argued that granting tax deeds costs less and allows counties to more quickly return abandoned properties to the tax rolls.
As a compromise, the senators decided to keep tax deeds but add the enhanced notification requirement — the highly visible warnings on envelopes — to better protect property owners. The letters were to be delivered by sheriff’s deputies or taped to the doors of dwellings.
But the enhanced provisions weren’t in effect for long. In 2014, with little discussion, lawmakers approved an amendment that put the warning requirement on hold for tax certificates sold between 2010 and 2014. Then last year, with even less discussion, they exempted tax certificates sold from 2015 through 2017.
That meant that companies like Vandelay were required to follow the old notification requirements, which include sending certified letters and publishing a notice in a newspaper in the county where the property is located.
A certified letter requires postal workers to obtain the signature of the person to whom the letter is addressed or his or her representative. After several weeks, if the letter is not delivered or no one comes into the post office for it, the letter is sent back. In both the Lincoln County and Ravenna cases, no one signed for the letters, and they were mailed back to Vandelay.
So James published a notice in newspapers, but in each instance, he chose papers that circulated in areas farther away from where the properties were located — making them less likely to be seen by the owners.
For example, Moss said he buys a copy of the Ravenna News every week. But Vandelay placed the notice in the Beacon Observer in Elm Creek, 45 miles southwest of where Moss lives.
The courts have said James’ approach is legal.
In Douglas County, more than 3,000 treasurer’s deeds are sold each year. Dennis Rookstool, property tax manager at the Douglas County Treasurer’s Office, said he would prefer to see a change in the law so that there is judicial oversight of tax deed transfers. The current system is troublesome, he said, because “it is virtually impossible for the Treasurer’s Office to ensure proper notice has been given.”
Mark Porto, a Grand Island lawyer who represents Moss, said he is confounded by the Legislature’s conflicting actions on treasurer’s tax deeds. He said the enhanced notice requirements are needed to protect the rights of property owners before it’s too late.
“It’s a pretty shameful process as far as I can tell,” Porto said. “It’s left a lot of elderly people in a vulnerable position.”
Attorney Jerry Milner, who has also worked on the Moss case, described a phone conversation he had with James. In it, Milner was questioning the legality of the amendment adopted by lawmakers in 2014, which prompted James to say he had drafted the amendment, Milner said. The statement left Milner speechless, he said.
Milner said the idea that someone’s property can be taken without ensuring that they receive adequate notice is hard for him to grasp.
“It’s a travesty this kind of injustice can occur,” he said.
John Lindsay, the lobbyist hired by James over the past several years, said he doesn’t know what the lawyers may have discussed. But he said that James was just one of several interested parties who provided input on the 2014 amendment and that it’s not accurate to suggest that he wrote it.
Lindsay said that after lawmakers passed the notification enhancements in 2012, there was confusion as to whether the changes applied to tax deeds already being processed. So to clear up the confusion, the amendment was offered in 2014 to suspend the changes.
The lobbyist argued that the notice provisions are more than sufficient.
“At some point, people have a responsibility to look at the notices and take action,” he said.
State Sen. Burke Harr of Omaha introduced the amendments that suspended the enhanced notice provisions in 2014 and 2017. He said that at the time, he wanted to clear up uncertainty over the notification rules. Now he said he is troubled by the idea of families losing their farms and homes after saying they didn’t receive notice.
“Just because it’s legal doesn’t mean it’s ethical,” said Harr, who will leave the Legislature in January because of term limits.
Moss said the problem of unpaid taxes on his home traced back to the first year he qualified for a property tax exemption under the homestead allowance. The subsequent statements he received from the county did not indicate that he owed anything, he said.
Moss said that after he learned that he had lost the deed to his home, he made multiple offers to settle the dispute for more than James had invested in the deed. James refused to settle.
In the case of the $1 million farm near North Platte, Robin Wisner said he simply didn’t know that his mother’s property taxes were not being paid. Wisner, who lives in Ames, Iowa, said that as his mother’s registered agent, he arranged to have all of her bills paid by a bank trust officer in North Platte.
His mother, who suffered a series of mini-strokes before the tax deed case played out and has since died, never said anything about receiving letters threatening to take the family farm. Despite testimony from the woman’s doctor that her cognitive function was impaired, the courts sided with a medical expert hired by Vandelay who said she was fine, even though the expert never spoke to or examined the woman.
Wisner said he contacted James and offered to pay a settlement, but the offer was refused.
The hardest thing for Wisner and his two sisters is losing land where they grew up, a piece of family history bound with so many memories.
“I don’t hurt for money,” he said. “But losing that farm and knowing that somebody got it the way they did, that hurts something terrible.”