Municipal Lien Process Why are liens important to municipalities? - PowerPoint Presentation

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Municipal Lien Process

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Why are liens important to municipalities?

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A lien has been defined as a claim or charge on property for payment of some debt, obligation or duty

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Types of liensMortgagesMechanic’s liens

Tax liens Federal, state and local Special Assessment liens

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Why are liens important?Liens attach to specific property for payment or to secure payment of a debt, charge or obligation.

This includes all type of real property – land and improvementsProvide a specific source of payment for the debt charge or obligation

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Why are liens important - continued?Permit the lienholder (creditor) to sell the property to satisfy or pay the debt, charge or obligation

Can provide that certain lienholders receive payment over other lienholders – this is termed “lien priority” or “priority”

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How are liens created ?Voluntary – a mortgageInvoluntary/statutorily –tax liens, mechanic’s liens and oil and gas liens

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What liens do:They provide specific property as a source of payment for a charge or debt – a specific “collateral if you will

They avoid the possibility that collection will be based on the debtor’s personal obligation to payThey can, in certain circumstances, provide a priority claim to payment over other lienholders 

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Liens are enforced by “foreclosure”What does this mean?

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Utility accountsWater, wastewater, solid waste, natural gas, electricity or other user charges

May not be an inclusive list

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The “Normal” Assessment and Collection Process for utility accounts:Monthly or some term for billingTermination of service for non-payment

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How do you collect arrears? Recover personally from customer or user

Debt collection or litigation?

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Could a municipality utilize a lien process to assess and collect delinquent utility users? We believe the answer is “yes”.

Question has existed about whether municipalities have the authority to so act.

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Look at the 2018 interim legislative processProposed legislation and result of proposed legislation

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In light of the Legislature’s response, if one were to consider this process, it is probably good practice to consider adoption of an ordinance setting forth a lien process and effect of the process

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The statutory basis for exercising such power is found in § 15-1-126 which provides Every officer and employee collecting or receiving monies belonging to the city or town shall settle with the treasurer on or before the last day of each month, or as directed by the governing body, and immediately pay all money into the treasury for the benefit of the funds to which the monies belong. If the last day of the month falls on Sunday, or a legal holiday, the payment shall be made on the next preceding business day.

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Basic considerations or questions:What factors could be considered in determining when to assess and enforce?What utilities or users does a law apply to?What is a “delinquent account”?What is the process for imposing a lien and collecting it?

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Ordinance Template

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Dangerous Building AbatementWhat is being dealt with? Declaration of danger, abatement, assessment and collection Includes lien assessment and foreclosure

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Is there statutory authority to act?Yes. § 15-1-102 (a) cities and towns have the power to:

(xix) Declare and abate nuisances and impose fines upon parties who create, continue or permit nuisances to exist; (xxvi) Provide for the repair, removal or destruction of any dangerous building or enclosure;

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In order to adopt a lien process, it will be necessary for the municipality to adopt The Code for the Abatement of Dangerous Buildings

This should give the town/city a good foundation for specific ordinances to fill in the enforcement process

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Similar questions arise in abatements regarding when action will be taken and what the lien foreclosure and assessment process could look like

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This means that your city/town will need to discuss and consider when to assess and when to foreclose a lien

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Priority and its importance:Why the date a lien is created can be important

What priority do you want to set by law?

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Ordinance Template

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Questions or observations?Disclaimer and advice of counsel