Ellsworth council to revisit sale proceeds from foreclosed home after public outcry

The Ellsworth City Council heard an extended presentation from Tax Collector Sue MacLean on procedures the city follows for tax liens, foreclosure and sale of tax-acquired properties, and directed staff to return a specific case to the council’s July agenda for further review.

MacLean told the council she follows a multi-step statutory process that begins with pre-lien notices, proceeds to lien filing and certified notices to mortgage and deed holders, then to foreclosure after required statutory timelines and finally to sale. She said the city had become more cautious about selling foreclosed properties after prior lawsuits and that state law gives prior owners a path to challenge foreclosures in some cases.

The discussion focused on one property and on a request from Councilor Charlie O’Halloran that the council consider returning net sale proceeds to the prior owners. O’Halloran said he was troubled that a family had lost what he described as substantial equity in their home and asked the city manager and legal staff to examine whether the city could refund proceeds or otherwise make the family whole. MacLean described the timeline of notices and the city’s usual practice of holding proceeds to cover taxes, fees and costs of maintaining foreclosed property; she said legal constraints and ordinance language limited how the city could distribute excess proceeds without a specific enabling policy.

Several council members and residents pressed for more detail. Resident commenters said they had difficulty locating the prior owner during the foreclosure and that some certified mailings returned with postmaster signatures during the COVID period. Council members asked the manager and city attorney to compile a legal opinion and an accounting of foreclosed-property proceeds and losses, and to estimate how many similar cases might be affected if the council sought to apply any new refund policy retroactively.

City Manager Charlie (unnamed in transcript) and other staff said more analysis was needed to understand legal constraints, possible precedents and budget impacts. The council did not adopt a policy or vote on a refund at the meeting. Instead the council agreed to schedule a July agenda item for discussion and possible action on returning proceeds in the named case and to request legal advice and an accounting of comparable cases.

Council direction and next steps: the council asked staff to prepare legal guidance, an accounting of related tax-acquired sales and an estimate of fiscal exposure if the council chose to authorize refunds; the item will return to the council in July for discussion and potential action.

Details in brief: MacLean described the city process (pre-lien notices, lien filing, 18-month statutory foreclosure trigger, redemption period and post-foreclosure sale). Councilors and residents reported the particular sale netted roughly $135,000 after auction costs and that the city’s tax lien and costs consumed roughly $20,000, leaving what speakers described as prior-owner equity in the low-six-figures; MacLean cautioned those numbers were case-specific and that she provided full records to the council.

The council’s July review will include legal analysis (state statute and recent court guidance referenced by staff), financial accounting of the sale, and options for whether and how the city could return proceeds or otherwise mitigate harms to prior owners.