Retention of Excess Tax Deed Proceeds Unconstitutional

Polonsky v. Town of Bedford
Hillsborough Superior Court, Docket No. 216-2015-CV-388
Tuesday, May 14, 2019

On May 14, 2019, the Hillsborough Superior Court issued an order resolving the remanded issues in Polonsky v. Town of Bedford, 171 N.H. 89 (2018). This case stems from the plaintiff, Richard Polonsky, failing to pay his property taxes from 2008 – 2010 and the subsequent tax-deeding of that property to the Town of Bedford in 2011.

In 2013, the town gave Polonsky notice it intended to re-sell the property and provided a redemption amount.  Polonsky attempted to negotiate a repurchase without paying the “penalty” provided in RSA 80:90(I)(f), but the town rejected that offer. He did not redeem the property and remained in possession. The town did not seek to sell the property at that time but resumed efforts to sell it in 2015. Polonsky initiated suit thereafter.

When the New Hampshire Supreme Court originally heard this case, it resolved the issue of whether the Town had correctly tax-deeded the property in favor of the Town and held that the statutory scheme spanning RSA 80:88 - :90 prohibited a prior owner to claim excess proceeds from any future sale of the property after the three year period lapsed. Despite this holding, the New Hampshire Supreme Court sent the case back to Superior Court to address several questions pertaining to whether this statute constituted an unconstitutional taking in violation of Part I, Article 12 of the New Hampshire Constitution.

On remand, the Superior Court determined that the statutory scheme, which relieves a municipality, three years after the recording of the tax deed, of its duty to distribute to the former owner the “excess proceeds” of a sale, is, in fact, unconstitutional under Part I, Article 12 of the New Hampshire Constitution.

How wide an impact this decision will have is not yet known. Technically, Superior Court decisions are persuasive, not precedential, but, if this decision is appealed, it is possible that the New Hampshire Supreme Court will agree with the Superior Court's decision. If that occurs, it is not yet clear what, if any, retroactive application that decision will have and what rules municipalities which sell tax deeded properties more than three years after deeding will have to follow.

VIEW COURT DECISION HERE!

Additional Information: 

Practice Pointer:  It may be prudent to escrow those proceeds or delay such sales until this case is ultimately resolved by the New Hampshire Supreme Court on the anticipated second appeal. On the other hand, municipalities may wish to dispose of tax-deeded property within the three-year window after tax deeding, thus avoiding questions about how to handle excess proceeds.