December 20, 2005
LIENS FOR HEALTH AND ZONING CODE VIOLATIONS
By: Kevin E. McCarthy, Principal Analyst
John Rappa, Principal Analyst
You asked the following questions regarding statutory “superliens” (i.e., liens that are superior to some or all previously perfected liens) for violations of local zoning, health, and building code violations:
1. what laws in Connecticut allow for superliens and what procedures exist to obviate the hidden nature or impact of such liens, such as time limits for the recording and foreclosure of such liens;
2. which other states authorize municipalities to impose superliens for code violations and are there any exceptions to their priority;
3. do these states have an index system that enables a purchaser to discover the existence of such a lien from a single source;
4. do bona fide purchasers in these states take the property free of an unrecorded lien; and
5. what liens imposed by the federal, state, or local government do not take priority over previously recorded liens and encumbrances.
Superliens in Connecticut
Connecticut has superlien provisions in connection with real property taxes, water and sewer assessments, condominium association assessments and fines, violations of blight ordinances, a municipality's costs in demolishing unsafe buildings, the Department of Environmental Protection's costs in cleaning up hazardous waste spills, and several state taxes. In most cases, the law requires the lien to be recorded in the town land records and thus is not hidden. In several cases, the lien can only be continued for a finite period of time, e.g., for 15 years in the case of property tax liens.
Superliens in Other States
A least 16 states have statutes allowing municipalities to impose a superlien on property in connection with violations of local laws, such as health, building, and zoning codes. In most cases, the lien does not apply to fines for violations of these codes but only for the municipality's costs in abating a violation, e.g., demolishing a building that violates the building code. Under such provisions, the property owner must first be notified of the violation and given an opportunity to abate it. If he does not, the municipality can do the work and bill the owner. The bill becomes a lien only if it is not paid within a specified time.
Four states (Delaware, Kentucky, Michigan, and Vermont) allow municipalities to lien properties with unpaid fines. In addition, in Massachusetts, municipalities may lien a property for unpaid charges. The lien goes into effect once it has been recorded on the registry of deeds for the county or district where the property is located. If the charge is not paid by the time the next property tax list is prepared, it is added to the tax bill and subject to the state's tax lien provisions (Mass. Gen. Laws ch. 40 § 58).
In nearly all of these 16 states, the superlien is inferior to tax liens. Alabama, Michigan, Tennessee, and Texas provide additional exceptions to the priority of the municipality's lien, for example for previously recorded mortgages.
In virtually all of these states the lien must be recorded, usually with the county registry of deeds or similar office.
The only states that we found that have provisions protecting bona fide purchasers of the liened property are Illinois, Vermont and Virginia. The Illinois provision only applies to costs incurred by a municipality for rat extermination. Vermont's provision only applies to personal property subject to a lien. In Virginia, the protection only applies if the lien is not recorded and the purchaser does not have actual knowledge of the lien.
A number of other states, including Arizona, Arkansas, Hawaii, and West Virginia allow municipalities to create ordinary liens for violations of local laws.
Federal tax liens are subject to complex priority rules. The liens do not have priority over certain encumbrances, notably mortgages, judgment liens, and mechanics liens, when the lienor's interest arose before the notice of the federal tax lien was filed. They also do not have priority over certain subsequent liens, including property tax liens under certain circumstances. Other federal liens are subject to ordinary priority rules.
The state of Connecticut has a lien for several taxes, most notably the income, sales, and corporate business taxes, whose priority is tied to when the tax becomes due but otherwise is not superior to previously perfected liens. These tax liens are not effective against any bona fide purchaser or encumbrancer of any interest in the property. The statutes also allow the social services commissioner to lien property owned by a person receiving public assistance.
Municipal assessments for water main extensions and certain other public improvements are an ordinary lien against the properties that benefit from these improvements.
Property Tax Liens
Under CGS § 12-172, once the assessment list has been set, the property tax (including interest, fees, and charges) is a lien. A lien also applies to the obligation to make a payment in lieu of taxes (PILOT) under certain circumstances. Among other things, the PILOT obligation must be recorded in the municipality's land records. The lien takes priority over all transfers and encumbrances affecting the property or any part of it. However, the lien does not apply to certain security interests in personal property, such as inventories (CGS § 12-195f).
The municipal tax collector can continue a lien by filing a certificate in the town clerk's office. The certificate must include the taxpayer's name, a description of the property, the amount of taxes due, the date when they became due, and a statement giving notice against relevant insurance proceeds if a covered fire, damage, or loss has occurred. The clerk must file the certificate on the land records. Even if a certificate has an error, omission, or irregularity it provides valid notice of the continuation a subsequent purchaser or encumbrancer if it is filed “in a timely manner” and it notifies the purchaser or encumbrancer of the existence and extent of the lien. Alternatively, a tax collector can continue a lien pursuant to CGS § 12-175. He must do so within two years of when the first installment of the tax became due. He must record the continuation in the land records and notify the property's owner. Under both options, the lien runs for 15 years, unless the municipality begins a foreclosure action
Cities with populations of more than 100,000 (Bridgeport, Hartford, New Haven, Stamford, and Waterbury) can adopt ordinances with alternative recordation procedures for continuation certificates. The continuation certificates must be placed on the land record (CGS § 12-177).
Under CGS § 12-19n, a municipality may provide property tax relief to elderly and disabled homeowners. If the relief is more than 75% of the amount of taxes due, the municipality must lien the property for the amount of the relief plus interest at a rate determined by the municipality. The lien has priority in the settlement of the person's estate. The statute does not impose any recording requirements on this lien.
Sewer Assessments and Water Charges
Under CGS § 7-254, delinquent municipal sewer assessments, plus interest, are a lien on the property. The lien has priority over all other encumbrances except taxes and can be enforced in the same way as property tax liens. CGS 7-258 has similar provisions for delinquent sewer connection and use charges.
Similarly, unpaid municipal water utility and private water company charges are a lien on the property served (CGS §§ 7-239 and 49-72, respectively). The municipal utility lien only runs for one year unless continued by the superintendent of the waterworks system, in which case it runs for an additional 15 years. In the case of private companies, the lien runs for one year but can be continued for an additional 14 years. The municipal lien takes priority over all other encumbrances, except taxes. The company lien takes priority over all other encumbrances except taxes and condominium assessments.
Under CGS § 47-258, a condominium association has a lien on a unit for any assessment levied against the unit or fines imposed against its owner. Unless the condominium declaration provides otherwise, fees, charges, late charges, fines, and interest are enforceable as assessments. Recording of the declaration constitutes record notice and perfection of the lien, and no further recordation of any claim of lien for assessment is required.
The lien is prior to all other liens and encumbrances on a unit except (1) liens and encumbrances recorded before the condominium declaration was recorded and (2) liens for real property taxes and other governmental assessments or charges against the unit. The lien is also prior to a first or second security interest on the unit recorded before the assessment became delinquent, in an amount equal to (1) the common expense assessments based on the periodic budget adopted by the association which would have become due in the absence of acceleration during the six months immediately preceding institution of an action to enforce either the association's lien or the security interest plus (2) the association's costs and attorney's fees in enforcing its lien. Similar provisions apply to cooperatives. These provisions do not affect the priority of mechanics' or materialmen's liens or the priority of liens for other assessments made by the association.
Violations of Blight Ordinances
CGS § 7-148 allows municipalities to adopt ordinances to prevent housing blight and impose a fine of up to $100 per day for violations of these ordinances. CGS § 7-148aa provides that the unpaid fines are a lien against the property that was the subject of the fine from the date that the fine was imposed. The lien takes priority over all other liens filed after July 1, 1997, except taxes.
Municipal Demolition Costs
CGS § 49-73b allows a municipality to impose a lien for its costs in inspecting, repairing, demolishing, or otherwise disposing of real property in order to make it safe. To be valid, the municipality must, within 30 days of the completion of the work (1) file a certificate
describing the property on the registry of deeds and (2) give notice to the property's owner of the filing. The lien takes precedence over all other encumbrances except municipal taxes.
Liens for Hazardous Waste Spills
Under CGS § 22a-452a, when the Department of Environmental Protection (DEP) incurs costs in containing and removing or mitigate the effects of a hazardous spill or to remove any hazardous waste, it has a lien against the real estate where the spill occurred, from which it emanated. DEP also a lien for its costs against real estate where no spill occurred but from which hazardous waste was removed, so long as the hazardous waste did not enter the property through surface or subsurface migration.
The lien takes precedence over all transfers and encumbrances recorded on or after June 3, 1985 affecting an interest in nonresidential real estate, or any part of it where the spill occurred or from where the spill emanated, or real estate which has been included, within the preceding three years, in the property description of this real estate and is contiguous to such real estate. This priority does not apply to real estate that consists exclusively of residential real estate. Nor does it apply if a property is transferred in accordance with the Transfer Act (CGS §§ 22a-134 to 22a-134d). For such properties, DEP has a lien which only has priority over subsequent transfers or encumbrances.
The lien is not effective unless (1) a certificate of lien is filed in the land records of the town where the real estate is located, describing the property, the amount of the lien, and the name of the owner as grantor, and (2) the DEP commissioner mails a copy of the certificate to the owner of record and to all other persons holding a recorded interest in the real estate over which the commissioner's lien has priority.
Public Service and Railroad Companies and Petroleum Products Taxes
The utility or railroad company tax and the gross earnings tax on petroleum are lien's against the taxpayer's real estate. The revenue services commissioner can file a certificate of the lien on the records of the municipality where the property is located. The lien takes precedence over any other encumbrance. However, it is not valid against a bona fide purchaser or encumbrancer of the property (CGS §§ 12-268h and 12-594).
The succession tax, including interest and costs, is a lien on the real property passing. The lien's priority is of the date of death. But the lien is not valid against a lienor, mortgagee, judgment creditor, or bona fide purchaser unless notice of the state's lien is recorded in the town clerk's office of place where mortgages or conveyances are required to be recorded (CGS § 12-366).
OTHER STATES WITH SUPERLIEN PROVISIONS
A municipality's costs in demolishing an unsafe building is a lien on the property, which has priority over all other liens except prior mortgages and tax liens. A copy of the resolution establishing the lien must be filed with the county probate court (Ala. Code § 11-53A-4). If the building had been declared a nuisance, the lien takes priority over prior mortgages as well. The resolution must be filed with mortgagees as well as the court. Under this provision, the costs are added to the tax bill (Ala. Code § 11-53A-25).
In Delaware, court-imposed fines for violations of local building, housing, and sanitation codes are a lien on the property, which takes priority over all liens except for taxes. It requires the political subdivision imposing the fine to maintain a list, available to the public, indicating the location of the property, the amount of the lien, and the name of the person charged. The liens must also be indexed on a separate index maintained by the county prothonotary. The liens must indexed by the name of the person subject to the charge. These requirements also apply to liens for taxes and certain other charges. The lien applies to all real property owned by the person charged in the county at the time the lien is filed (25 Del. Rev. Code § 2901 et seq).
Georgia has two provisions regarding liens for violations of local laws. If a municipality or county incurs costs in abating violations of the public health, building, and safety codes after an owner fails to comply with an abatement owner, the costs (including the costs of building demolition) are a superlien on the property. The lien is superior to all other liens
except for taxes. In order for the lien to go into effect, the court must record and index the municipal order. The court must also enter the lien on the general execution docket (Ga. Rev. Code § 41-2-9).
In addition, municipalities and counties can establish code bureaus to enforce a wide range of local laws, including zoning, building, and subdivision control codes. Such bureaus can impose fines, which become liens on the property if not paid within three months. Unlike the provision discussed above, these are ordinary liens that do not have priority over previous liens. They run for 20 years, unless continued by a foreclosure action. The continuation of the lien is not valid against creditors or subsequent purchasers unless the county or municipality files a lis pendens for the affected property (Ga. Rev. Code § 36-74-21).
In Illinois, the costs that a municipality incurs in repairing, enclosing, or demolishing an unsafe or abandoned building or removing garbage from a property are a superlien on the property if the municipality files notice with the county recorder or registrar of titles within 180 days of taking action. The lien has priority over all other liens, except for taxes. There are similar provisions if the municipality determines that a building is an imminent hazard. In this case, the municipality must send a notice to abate to all of the lien holders of the property, as well as to its owner. The municipality's lien has priority over all of the interests held by parties who are sent the notice. But the municipality's lien does not have priority over a third party purchaser who acquired an interest in the property before having received actual or constructive notice of the lien. (Ill. Rev. Stat. ch. 65 para. 5/11-31-1). There is a similar superlien provision for rat extermination, although in this case, the lien does not apply to a third party purchaser or encumbrancer who acquires an interest in the property after the extermination but before the lien notice is filed (Ill. Rev. Stat. ch. 65 para. 5/11-20-8). Finally, a municipality may lien a property for its costs in removing garbage, graffiti, or Dutch elm trees, but in these cases, the lien is only superior to subsequent liens, other than for taxes.
A municipality may lien a property for its costs in bringing it into compliance with local codes. The lien cannot exceed $2,500 for vacant land and one- and two-unit dwelling units, and $10,000 for other properties. The lien is superior to all other liens, except for taxes, if it is recorded in county recorder's office (Ind. Rev. Code § 36-1-6-2.)
The fines, costs, penalties, and charges imposed by large (first class) cities for violation of municipal nuisance codes are a superlien on the affected property. The lien has priority over all other liens except taxes, There is no recording requirement in this statute (Ky. Rev. Stat. § 82.700 to 82.725). Smaller municipalities can lien property for violations of their nuisance codes, but these liens are only superior to subsequent liens (other than taxes) (Ky. Rev. Stat. § 381.770).
In Michigan, the fine imposed by a city or county for civil infractions involving the use or occupation of land is a lien on the property if the city or county files the court order for payment of the fine with the county registrar of deed. The lien has priority over all encumbrances other than (1) tax liens, (2) pre-1994 liens, or (3) federal liens (Mich. Rev. Stat. § 600.8731).
A city's cost in abating nuisances is a lien on the property if it is filed with the county recorder. It has precedence over all liens other than for taxes or special assessments (Mont. Code Ann. § 266.535). Similarly, a county can lien a property for its costs in cutting weeds if the owner refuses to, but this lien has no special priority (Mont. Code Ann. 555.120).
A city can place a lien on a property for its costs in abating a public health nuisance if the owner refuses to do so. The city can alternatively place the lien for these costs on other property owned by this person, other than his primary residence, that is located within the city or within one mile of city limits. The lien has the same priority as a tax lien. The city's court costs are also a lien, unless the nuisance was solely caused by someone other than the owner (N.C. Gen. Stat. § 160A-193). A city can also lien a property for its costs in demolishing an unsafe building. This lien is superior to all encumbrances except tax liens (N.C. Gen. Stat. § 160A-432).
A municipality can lien a property for the following nuisance abatement costs (1) boarding and securing a dilapidated building, (2) dismantling such buildings, and (3) cleaning properties and mowing grass. In each case, the lien must be filed with the county clerk. Unusually, such liens are equal in priority to tax liens and liens for special assessments. The liens are superior to all other liens (Okla. Stat. §§ 11-112.1, and 11-22-111).
A municipality's costs in removing nuisances is treated like a tax lien (Pa. Cons. Stat. §§ 53.7106 and 53.7107). The prothonotaries of the courts of common pleas are required to maintain a locality index showing all claims against properties (PA Cons. Stat. § 53.7416).
A county can lien a property for its cost in remedying a dangerous building, plus 25% of this cost. The lien is superior to all other liens except tax and vendor's liens. The lien must be filed in the county registrar's office (Tenn. Code Ann. § 68-102-123 to 68-102-125).
A municipality's costs in abating sanitation code violations or cutting weeds is a lien on the property, once the lien statement is filed with the county clerk. The lien is superior to all other liens except tax liens and liens for street improvements (Tex. Health and Safety Code §§ 342.007, 342.008) A local government's costs in abating substandard buildings, when filed with the county clerk, is a lien that is superior to all previously recorded judgment liens, but inferior to previously recorded mortgage liens (Tex. Loc. Gov. Code § 214.0015)
In Vermont if a fine for violation of any municipal ordinance is not paid within 30 days of the final judgment of the judicial bureau, a lien can be placed on any real or personal property the defendant owns (other than a motor vehicle). The lien must be recorded on the land records of the town where the property is located (24 Vt. Rev. Stat. § 1981) Such liens are treated as tax liens, and are superior to all other liens.
A lien on real property can be foreclosed if the fine is not paid within two years of the lien's creation. A lien on real property runs for 15 years and a lien on personal property runs for two years (32 Vt. Rev. Stat. § 5061 et seq.).
A lien on personal property is not enforceable against a bona fide purchaser who purchased the property, without actual knowledge of the lien, from anyone other than the person who is listed as the owner for tax purposes. Anyone against whom the lien is enforceable may not sell, mortgage, or pledge the property without discharging the lien. Violators are subject to a fine of up to twice the amount of the lien, of which half must go to the town claiming the lien (32 Vt. Rev. Stat. § 5073).
A city's cost for (1) repair or removal of unsafe or unhealthy buildings, (2) removing trash, or (3) cutting grass. The lien has he same priority has a lien for local taxes. A municipality can waive the lien to facilitate the sale of the property to a person or business that is unrelated to the current owner (Va. Code Ann. §§ 15.2-901, 15.2-906).
Virginia protects subsequent purchasers of the liened property under limited circumstances. The lien does not affect a bona fide purchaser of the real estate who does not have actual knowledge of the lien, unless, at the time of the transfer of the property, a statement containing the name of the prior owner and the amount of the unpaid charges. The county clerk must enter and index the statement against the record owner of the real estate (Va. Code Ann. § 15.2-104)
If a municipality or county incurs costs in repairing, altering, closing, removing, or demolishing buildings that are unfit for human habitation, the costs are added to the taxes on the property and are a lien on it. The lien has the same priority as state, county, and municipal taxes (Wash. Rev. Code § 35.80.030)
Washington also allows municipalities to lien property for the municipality's costs in clearing rubbish or brush from a property, but this is an ordinary lien (Wash. Rev. Code §§ 35.22.310 and 35.22.320).
OTHER GOVERNMENTAL LIENS
Unpaid federal taxes, plus interest and penalties, are a lien on taxpayer's property. In most cases, the lien attaches to all of the taxpayer's property, real and personal, including property acquired during the life of the lien. The lien is effective from the date of the tax assessment. Most encumbrances on or interests in the affected property, if perfected before this date, have priority over the tax lien. The tax lien itself can be perfected without the filing of a notice. However, filing the notice establishes the tax lien's priority against other claimants to the taxpayer's property. State law can specify where the notice must be filed (Int. Rev. Code § 6321 et seq.).
With significant exceptions, federal tax liens are subject to the first in time, first in right rule. But, the following persons are protected against the tax lien if they acquired their interest before the notice of the tax lien was filed: (1) purchasers; (2) holders of security interests, including mortgagees; (3) holders of a mechanics lien on real property; and (4) judgment lien creditors. This protection applies even if the person has actual knowledge of the tax lien. (Internal Revenue Bulletin 2003-44, November 3, 2003, Rev. Rul. 2003-108)
Once the notice is filed, the federal tax lien takes priority over most subsequently arising interests in the property. However, this provision does not apply to certain liens that arise after the filing. These include property tax and special assessment liens, if the state law provides give them priority over previously filed liens.
The Internal Revenue Service must refile its notice of tax lien within a one year period ending ten years and 30 days after the date of the assessment. Failure to refile at the appropriate time does not affect the validity of the lien, but it does nullify the legal effect of the prior filing. If a refiling is late, any security interest arising between the prior filing and the refiling has the priority it would have had if no notice of tax lien had been filed before the time of the late refiling.
Taxes. Several state taxes (including penalties and interest) are a lien on the real property owned by the taxpayer. The revenue services commissioner may file a certificate of the lien in the clerk's office of the town where the real estate is located. These provisions apply to the income tax (CGS § 12-734), corporation business tax (CGS § 12-235), the sales tax (CGS § 12-420), the estate income tax (CGS § 12-405d), motor vehicle fuels tax (CGS § 12-475), motor carrier road tax (§ 12-488), and the dividends tax (CGS § 12-512).
The priority of these liens is tied to tax periods. For example, a lien for delinquent corporation business taxes is effective as of the last day of the relevant income year. In the case of the lien for delinquent sales taxes, the priority is from the last day of the month preceding the due date of the tax. The lien is not effective against any bona fide purchaser or encumbrancer of any interest in the property.
Public Assistance. The social services commissioner can place a lien against property to secure the state's claim for public assistance it has paid or will pay. The lien can be applied to property owned by the recipient or owned by a person who is liable to support the recipient. This provision applies to several programs, including temporary family assistance and food stamps. The state's claim has to be secured by a filing in the town's land records, describing the real estate. The commissioner can bring an action to foreclose the lien (CGS § 17b-79).
In Danbury Savings and Loan v. Delaney 207 Conn. 743 (1988) the Supreme Court held that the state liens were inchoate under federal law and therefore did not have priority over subsequently filed federal tax liens, because the state had taken no steps to perfect its lien by instituting foreclosure proceedings.
CGS § 7-137d makes assessments for water main extensions an ordinary lien on the benefited property, once the lien is filed with the town clerk. The liens can be foreclosed like tax liens. CGS § 7-140 has similar provisions for a city or borough's assessment of benefits for public works or improvements.