Cuyahoga County, Woods Cove Face Lawsuit Over Tax Lien Sales
by Nick Castele
Cuyahoga County and an investment company are being sued over how they collect delinquent property taxes.
The suit centers on a practice called a tax lien certificate sale. Here’s how it works: An investment company pays the county up front what it’s owed. In exchange, the investor can try to collect from the delinquent taxpayer, at a maximum 18 percent interest rate.
Currently, a company called Woods Cove has bought up thousands of local tax lien certificates, and in many cases has foreclosed on delinquent taxpayers’ homes.
At the end of last month, two people who fell behind on their taxes sued. The lawsuit calls Woods Cove’s practices “unfair” and “deceptive.” It alleges delinquent taxpayers were charged exorbitant interest rates, and that liens were disproportionately sold in minority communities.
Gary Cook is the attorney for the plaintiffs.
“I could be wrong, but it seems to me that the county would be more agreeable to working something out with people that would make the payment of delinquent taxes affordable,” he said.
An executive with Davenport Financial, a company related to Woods Cove, declined to comment. Cuyahoga County communications director Mary Louise Madigan said the county has received the suit and will defend itself. The county and Woods Cove haven’t yet responded to the suit in court.
County officials were trying to negotiate new terms with Woods Cove, but last month, the county announced it had decided not to sell another round of certificates to the company. Instead, there will be an open bidding process next year.
And the county is considering starting up a unit to work with cities to identify homeowners at risk of delinquency, in order to work out payment plans with them.