UPDATE (December 2024): The new posting requirement discussed below was eliminated by Section 2J.1 of S.L. 2024-57.
The Machinery Act has long required counties to advertise their delinquent real property tax liens in local newspapers each spring. GS 105-369. I’ve discussed the advertising process here and here and here. While newspaper advertisements seem a bit outdated in 2024, the process is profitable for many counties in large part due to the warning notices required to be sent to delinquent taxpayers 30 days before the ads run.
Earlier this month, the General Assembly add a new wrinkle to the advertising process. Thanks to S.L. 2024-45, sect. 22.(a), as of 2025 counties will be required to also advertise real property tax liens by “posting notice of the lien in a conspicuous manner at the parcel to be advertised.” In other words, the tax office will need to visit each property subject to a delinquent tax lien and post a sign or other notice that references the lien.
How many delinquent tax liens are there in your county each year? Mecklenburg County had about 20,000 this year. Orange County had over 3,500. Our smallest counties might have only a few hundred delinquent tax liens annually, but they of course have much smaller tax office staffs and budgets.
The burden of personally visiting each of those properties to post signs about the liens will be significant regardless of county size. As Neal Dixon, the longtime Mecklenburg County tax collector commented, “To comply, we would have to redirect staff from other important duties and collection tasks or incur additional costs for more staff or an outside vendor contract. I very much doubt these extra costs would improve our collection results.”
It’s unclear whether the tax office may charge taxpayers for the additional costs incurred posting the new property notices. GS 105-369(d) allows tax offices to charge “an advertising fee to cover the actual cost of the advertisement.” Previously, the term “advertisement” meant simply the newspaper ad. But now I think that term could also cover the new property notices, because they are described in the subsection that is entitled, “Time and Contents of Advertisement.” If so, then the advertising fee charged to the delinquent taxpayers can include the costs of both the newspaper paper ad and the property notices. Tax offices should take care to detail the actual costs incurred to post the property notices, be they internal staff costs or external vendor contracts.
(Don’t be confused by the language in -369(c) that states “The costs of newspaper advertising shall be paid by the taxing unit.” That language is not new; it existed before the statute was changed to add the property notice requirement. Subsection -369(d) still allows counties to charge fees for their advertising costs.)
Another concern is the potential for negative interactions with residents if tax officials are required to physically enter thousands of properties to post lien notices. As I discussed in this post, taxpayer complaints about tax officials trespassing on their properties are becoming more common and increasingly confrontational.
Supporters of the new law might argue that these trade-offs are worth the benefits it provides to taxpayers. More taxpayer notice is better than less, right? But taxpayers already receive written notice of their delinquent tax liens under the current version of GS 105-369. And if a lien remains unpaid and moves to foreclosure, additional taxpayer notices are already required under the foreclosure provisions, GS 105-374 and -375. Those notices, which must occur at the time the foreclosure action is initiated and again prior to a sale of the property, often include postings on the properties.
Regardless of what tax officials and I might think about this new requirement, the bill has become law and will affect 2025 taxes. I’ve heard that the NC Tax Collection Association is lobbying to get this law amended, but for now counties need to plan for this new obligation when budgeting for the next fiscal year.
A quick note to cities that collect their own taxes: this bill applies to you too! While I’ve used the term “county” in this blog post for the sake of simplicity, the new posting requirement applies to any local taxing unit that collects delinquent taxes.
Here are my thoughts on how best to satisfy this new requirement.
Timing: the law states that it first takes effect for the 2025 tax year and that the advertisements, presumably including the new property notices, must be made between March 1 and June 30. However, it does not specify the order in which the different advertisements (newspaper and property) must occur. My suggestion is to wait on the property notices until after delinquent taxpayers have had the opportunity to respond to the county’s pre-advertisement notices. Doing so will substantially reduce the number of physical notices that will need to be posted on properties. Many counties receive payment on 30 to 50% of their delinquent tax liens after the advertising notices are mailed.
Form of notice: the law does not state what needs to be included in the property notices. My suggestion is to mirror the information required for the newspaper advertisement: name of the property owner as of January 6 (the delinquency date), address of parcel, the principal amount of taxes owed on the property for that tax year, a reference to the fact that the amount owed will be increased by interest and costs, and a statement that the property may be foreclosed upon and sold to satisfy the tax lien. GS 105-369(c). If the property has been transferred since the delinquency date, then the county may also want to include the name of the current owner because they are also personally responsible for the delinquent taxes. GS 105-365.1. Finally, I recommend that the notice include information on how to pay the delinquent taxes—perhaps a QR code that links to the county tax payment website?
“Do we really have to do this?!?”
Well, it is the law. And I can’t in good faith advise local governments to ignore state law. But I will point out that GS 105-369 makes clear that the failure to satisfy the advertising rules, including the new property posting requirement, “does not affect the validity of the taxes or liens.” This statement suggests that a taxpayer could not defeat an effort to collect a delinquent tax based solely on the county’s failure to post notice of the delinquent tax lien at the taxpayer’s property.
The one exception might involve the in rem foreclosure process under GS 105-375. That process cannot start until “30 days after the tax liens are advertised.” -374(b). If advertising now includes both the newspaper ad and the property notices, then a county could not use in rem foreclosure unless the new property notice requirement is satisfied. That said, f the county doesn’t plan to use in rem, then I don’t see any substantial legal risk if the property notices are not posted.
But there might be public relations consequences. It would not be a good look for a county tax office to admit that it was aware of the requirement to post notices on properties but simply decided that it wasn’t worth the effort.
Of course, if your board orders the tax office not to spend any resources on this posting requirement, I don’t think the tax office has leeway to ignore that order. In that situation, I would advise the tax office to keep evidence that it informed the board that the property postings were mandatory and not optional just in case of subsequent negative publicity.
