County discusses outsourcing tax-foreclosure services and land bank risks

The Bourbon County Commission heard detailed explanations Feb. 6 about how outsourcing tax-foreclosure litigation works and the legal risks when foreclosed properties move into a municipal land bank.

Christopher McElgin, an attorney with the firm Clint Osterman, told the commission the “primary goal is to get people to come in and pay the taxes,” and that the foreclosure process is designed to give notice to owners and known interest holders so only those who were not properly served could later set aside a sale. He added that buyers at tax-foreclosure sales take property “with notice of all defects” because the courts, not the county, issue the deed in a foreclosure sale.

Why it matters: Commissioners said they are several years behind on pursuing tax foreclosures and are considering outside counsel to bring parcels current. McElgin described the typical vendor approach the county would hire: compile title work, add parties revealed by title searches to the foreclosure suit, attempt personal service, publish notice where needed and document efforts to withstand later challenges. He said the firm charges a per-parcel flat fee that is added to the redemption amount; he estimated a typical range around $300–$350 per parcel plus title fees and publication costs, and noted an additional per-parcel attorney fee of about $350 would be assessed and added to the redemption amount.

Land bank concerns: Representatives of the local land bank explained many properties that arrive at the land bank carry only quitclaim deeds after sheriff or tax sales, which makes it difficult to sell that property on the open market or obtain financing. A land bank representative (identified in the record as Mr. Hoy) said the organization often receives properties by forfeiture after no bidders appear at a sheriff sale and said the land bank’s interest would “stand in the shoes” of a tax-sale purchaser — meaning it too would take property subject to post-sale challenges where service was inadequate.

McElgin agreed that land banks face limits and cautioned that tax-foreclosure statutes are not structured to funnel property into a land bank. He also said that some liabilities and liens (existing special assessments that are liened on the property) are wiped out by a tax sale; future specials that are not yet liens are not necessarily removed.

Costs and mechanics: McElgin walked the commission through the money flow at sale: sale proceeds first pay costs (title, publication, sheriff, attorneys), and remaining funds go to subordinate lienholders per statute; if insufficient, attorney fees may be reduced. He emphasized that the county itself does not give any warranty on title after a tax foreclosure sale.

Next steps: Commissioners asked for more information and scheduled a March meeting and a land-bank school so county officials can review the legal framework and options. McElgin offered to meet with the land bank and attend one of its meetings to provide a longer, in-person briefing.

Ending: Commissioners repeatedly returned to the operational question of how to proceed on roughly 80 parcels identified as eligible for foreclosure and whether the county should contract the full-service workflow McElgin described. No formal contracting decision was made at the meeting.