Loudon County is pulling hundreds of lots from a delinquent tax sale scheduled for next week, because they could create a liability of more than $500,000 per year for the county if they do not sell.
But the Tellico Village Property Owners Association filed a motion in Chancery Court Thursday disputing the county's right to cancel the sale.
The move by the county affected more than 400 lots at Tellico Village, Rarity Bay and Tennessee National that were scheduled for the tax sale, and that represented about $35,000 in back taxes due since 2009.
According to County Trustee Chip Miller, an order from Chancellor Frank Williams pulling the lots was delivered to Clerk and Master Fred Chaney on Wednesday, at the direction of the county mayor's office.
TVPOA spokesman John Cherry said a sale of the lots would benefit the TVPOA and Loudon County citizens in connection with potential taxes and assessments on some 350 Tellico Village lots. "If the lots are not included in the Oct. 20 tax sale, they will remain in legal limbo for two more years, during which neither county taxpayers nor the TVPOA will benefit," Cherry said.
The TVPOA motion disputed whether or not the county mayor had the authority to order the lots pulled from the sale. "The sole basis for Plaintiff's request to remove the Tellico Village Property was a directive from the Loudon County Mayor," the motion said. "However, Plaintiff cited no legal authority that would allow for the relief requested."
If the lots did not sell and became property of the county, state law requires the county to continue to pay the property owner's association monthly dues. At Tellico Village, where the majority of delinquent lots are located, monthly dues are $106.75 per month per lot. "They're almost impossible to sell because they have substantial tax liens against them," said Cherry. "As a result, taxpayers can't benefit from taxes collected on those lots that might be sold in the tax sale, and the POA can't receive assessments that would be due on those properties."
There is a five-year deadline within which the county must take action on the lots. The county is in the last year of that five-year window for lots that have been delinquent since 2009, Miller said.
Miller said he is not sure if the county would have to take on liability for back POA fees, which might increase the total liability three-fold. Another batch of about 350 lots delinquent since 2012 and 2013 are prepared to join the others in coming years.
"We've kicked this can down the road the last couple of years. I think this could be our last kick," said County Commissioner and budget committee member Van Shaver. Shaver said the county has been working with its attorneys and local legislators for several years to find a solution to the problem.
State Rep. Jimmy Matlock, R-Lenoir City, has been working on the issue for more than a year. Last year, along with Sen. Randy McNally, R-Oak Ridge, he was able to pass legislation that takes a step toward solving the problem for Loudon and several other counties.
According to Matlock's office, HB54 authorizes certain tax entities, such as a county, to enter into negotiations with certain non-governmental entities, such as an HOA, to make a deal allowing an undeveloped or unimproved property being sold at a tax sale to be transferred to the HOA for the purpose of settling the HOA fees.
"Passage of HB54 is a compromise on a solution regarding a rapidly growing problem with HOA fees and tax-delinquent properties in Tennessee that began shortly after the economic downturn in 2008," said Matlock's aide, Theo Vallas.
The 350 properties have total assessments of some $400,000; however, the TVPOA has never insisted that Loudon County pay all assessments upon conclusion of the tax sale, but seeks to work out a process fair to everyone involved, Cherry said.
If the county doesn't reach a deal with the POA's before the five-year window is up, it will have to sell the lots and accept the costs of POA dues.
Most of the lots were owned by Capital Source and Capital Source Paradiso — a Maryland bank and the bank of record to now-defunct National Recreation Properties Inc. — and assorted big-block owners including James and Gloria Blalock, Bob Reed Builders Inc., and O&G Royal LLC/Property.