Property Taxes Not Paid? The City Can Sell Your Home Without Any Court Hearing

Decades-old ordinance lets municipalities take action at their own discretion against citizens who have unpaid bills.

The year 1929 saw a multitude of economic catastrophes. The financial crisis started in the United States with the collapse of the stock market, leading to a prolonged and unprecedented depression. Thousands of miles away, in Mandatory Palestine, a tax collection ordinance was enacted, regulating measures for the collection of taxes and unpaid debts.

This ordinance served the mandatory civil service well, enabling it to swiftly collect unpaid debts. With the stroke of a pen, authorities could quickly take possession of the assets of unruly natives who did not pay their debts in a timely manner.

What was good for the British authorities quickly proved to be just as good for the Finance Ministry, which now applies the same ordinance when dealing with unpaid municipal and local authority taxes. Eighty-three years after it was enacted, the ordinance still serves city hall well - at the expense of debtors' rights.

The tax collection ordinance permits local authorities to take action at their own discretion against citizens who have unpaid bills, without resorting to legal action and without obtaining a court ruling. The ordinance does not require any legal process to be followed prior to initiation of collection measures. This saves municipalities the inconvenience of legally determining and proving to a court the amounts owed, and enables them to bypass counter-claims made by citizens. This course of action also avoids wasting time waiting for a court ruling.

Municipalities wishing to enforce collection currently have two courses of action available to them. One involves turning to the law enforcement's collections authority, which requires a legal process enabling the debtor to make his case in court. The other course is to use the tax collection ordinance, which is swifter and harsher. A municipality taking this route does not give the citizen the chance to defend himself by making use of legal rights that are possible when dealing with the collections authority, such as means testing and working out manageable payment schedules.

The courts have ruled in the past that the tax collection ordinance should be utilized sparingly. It was ruled that the main path for unpaid tax collection should be a legal process in which the courts are involved, and that enforcement should be carried out by the collections authorities.

One municipality that commonly uses the ordinance is Eilat. It is currently in the process of selling off apartments belonging to citizens who defaulted on their property taxes. This is being done in the absence of any court ruling.

The department for legal aid at the Justice Ministry, which assists people of limited means, claims that the majority of cases involve debts which have expired, and which have not been verified by any court. The city claims that these are cases in which people have accumulated debts over many years and are refusing to pay them off. Furthermore, it claims, there is no legal basis for evading these taxes, and no expiry date should apply.

Denying equality of citizens before the law

Attorney Eyal Globus, head of the legal aid department at the Justice Ministry, says that municipalities and local authorities have widely diverging approaches to the use of the tax collection ordinance for recovering unpaid taxes. In his words, "These differences in collection practices negate the equality of citizens before the law. Citizens in every locale across the country should enjoy the same municipal services and should receive similar treatment by the authorities."

"Some municipalities never resort to using the tax collection ordinance, and only use the legally bound collections authority," he says. "Others employ a more compromising approach, and use the ordinance only after allowing their citizens time to settle their debts. The ordinance gives the municipality almost complete discretionary powers, leaving the citizen with minimal rights. The whole collection process is dictated by the municipal authorities."

Globus points out that the use of collections authorities reflects a more modern and enlightened approach to debt, since it allows for means testing and spreading out payments. In contrast, he says, "The tax collection ordinance allows the local authority to determine the amount owed. There is no court ruling or legal document to back the amount determined. City authorities determine the amount without taking into account possible exemptions or discounts citizens may be entitled to, or possible expiry dates on old debts. Although the amount owed can be disputed, a citizen will be hard-pressed to get anywhere without legal counsel."

Globus says it is time to consider changing the ordinance, and he believes creditors have less intrusive means of collecting debts which would give greater rights to debtors, such as using the collections authorities or allowing debtors to claim bankruptcy.

"If someone is cheating and evading payment, it is fine to take measures against them to collect payment," he says. "However, if a citizen has encountered family or health problems, solutions should be found that enable that person to continue working and earning. Anyone threatened with handing over their apartment and any earned income is not motivated to continue working, since this income goes straight to the creditors. The collections authority route is a more balanced one, compared to the collection ordinance."

A citizen can appeal the use of the ordinance, but this is a costly process that requires legal assistance. The complexities of court procedures are daunting, particularly for citizens who can't easily afford to hire a lawyer. The authorities, meanwhile, are usually represented by private attorneys who try to maximize the amounts collected. Often, their fees are proportionate to the amounts collected by the municipal authorities.