Municipal Lien Process

Why are liens important to municipalities?

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

Special Assessment liens Types of liens Mortgages Mechanic’s liens Tax liens Federal, state and local Special Assessment liens

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 improvements Provide a specific source of payment for the debt charge or obligation

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”

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

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 pay They can, in certain circumstances, provide a priority claim to payment over other lienholders 

Application and enforcement of liens for municipalities Application and enforcement of liens for municipalities Collection of utility accounts and Abatement of Dangerous buildings

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

May not be an inclusive list Utility accounts Water, wastewater, solid waste, natural gas, electricity or other user charges May not be an inclusive list

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

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

We believe the answer is “yes”. 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.

Look at the 2018 interim legislative process Proposed legislation and result of proposed legislation

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

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.

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?

Ordinance Template

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

Is there statutory authority to act. Yes 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;

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

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

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

Priority and its importance: Why the date a lien is created can be important What priority do you want to set by law?

Ordinance Template

Questions or observations? Disclaimer and advice of counsel