Chapter 5.31 Collections & Foreclosure Process For Delinquent Sewer Safety Net Liens

City Code Chapter

 (Chapter added by Ordinance 163063; amended by Ordinance 165798, effective September 2, 1992.)

5.31.005 Purpose.

  1. The purpose of this Chapter is to establish a process for the collection of delinquent assessment liens and for the foreclosure of liens on properties which have delinquent Safety Net Loan Program accounts.  The emphasis of the collections program will be to maintain good communication with property owners.  Persons having an interest in the property may bring the account current until the time of the sale.  After the sale, any person redeeming the property must pay the account in full.  This Chapter provides the authority for the City to recover its costs associated with the collection of delinquent accounts and establishes penalties and other incentives to encourage payment.  Foreclosure is viewed as a last resort.  It is the intent of the City to use foreclosure to protect the interests of the State of Oregon.

5.31.010 Definitions.

  1. A.  As used in this Chapter only, the following terms shall mean:
    1. 1.  “Assessment lien” means a lien placed upon certain real property for its proportionate share of costs incurred in the construction of the sewer system or for the connection of the property to the sewer system.
    2. 2.  “Collection costs” means the costs associated with the collection of the assessment such as billing and rebilling charges.
    3. 3.  “Delinquent assessment lien” means an assessment installment payment which has not been paid within 30 days after the installment payment due date.
    4. 4.  “Department of Environmental Quality” means the State of Oregon, Department of Environmental Quality.
    5. 5.  “Foreclosure sale” means a legal process which allows the City to foreclose and to sell property to liquidate a delinquent lien.
    6. 6.  “Foreclosure sale list” means a list of properties with delinquent assessments which the City will see at a foreclosure sale.
    7. 7.  “Redemption period” means the one-year period during which a person with an interest in the property may redeem the property which has been sold at a foreclosure sale to satisfy a delinquent assessment.
    8. 8.  “Redemption price” means the sales price plus interest and penalties.
    9. 9.  “Sales costs” means costs associated with the sale including the cost of advertising, sale direct and indirect costs related to notification such as the cost of any reports required to determine the names of persons having an interest in the property or the status of the property, printing, postage, advertising, posting of the property, title insurance and staff salaries, benefits and overhead costs directly expended to complete the sale.
    10. 10.  “Sale price” means the amount owning on the principle, interest, penalties, collection costs and sales costs.
    11. 11.  “Sewer safety net participating property”: A property on which the assessment or connection charge has been funded by the City of Portland, Sewer Safety Net Loan Program.

5.31.015 Applicability and Foreclosure Options.

  1. A.  The provisions of this Chapter apply to delinquent assessment liens on Sewer Safety Net participating properties.  The provisions of this Chapter do not apply to delinquent bonded liens or delinquent open liens.  The foreclosure procedures applicable to these types of liens are set forth in Chapter 5.30.
  2. B.  The City shall not be limited to the foreclosure process in this Chapter.  The City may elect to use a Judicial Foreclosure process or to sell the property as provided in the Charter, City Code or state law.

5.31.020 Authorities and Responsibilities.

(Amended by Ordinances 181483 and 189413, effective March 6, 2019.)

  1. A.  The Revenue Division shall maintain the records related to Sewer Safety Net assessment liens, bill and collect lien accounts, administer the preforeclosure collection process, prepare a preforeclosure list, and transmit the preforeclosure list to the City’s Bureau of Environmental Quality and the Commissioners for informal review and prepare a final foreclosure list for review by the Council.  The Revenue Division shall also renegotiate loans, reduce the amount of liens, terminate foreclosure proceedings or eliminate liens as directed by the Department of Environmental Quality.
  2. B.  The Council shall review the final foreclosure list and adopt an ordinance which lists the properties subject to foreclosure and subject to purchase.
  3. C.  The City Treasurer shall administer the foreclosure sale process, purchase property identified by the Department of Environmental Quality and Council for purchase by the City, administer the redemption process and execute deeds conveying the property sold.  There shall be at least one sale held annually.
  4. D.  The OMF Business Operations Division shall manage, maintain, rent or market for sale properties purchased by the City Treasurer for collection of delinquent assessments.

5.31.025 Collection Process.

(Amended by Ordinance 189413, effective March 6, 2019.) 

  1. A.  The Revenue Division shall establish a collections process and shall be authorized to:
    1. 1.  Establish in writing, rules and procedures to carry out provisions of this Section.  Maintain a record of the rules and procedures and make the rules available to the public.
    2. 2.  Establish fees including a billing and rebilling fee to recover the cost of collecting the delinquent lien amount;
    3. 3.  Establish penalties and increases in the interest rate to encourage early payment of delinquent lien accounts; and
    4. 4.  Report delinquent lien accounts to a credit rating bureau to encourage payment if directed by the Department of Environmental Quality and the Council.
  2. B.  The Revenue Division will notify the Bureau of Environmental Services when an account becomes 60 days past due.  The collection process shall begin after the account becomes 90 days past due.  The Bureau of Environmental Services may delay the collection process up to 12 months if it notifies in writing to the Revenue Division and the Department of Environmental Quality.  Such notification will include the account number, the principal balance, the past due amount, and the extenuating circumstances that would justify a delay in the collection process.  The collections process at a minimum shall include the following steps:
    1. 1.  The property owner and mortgage holder shall be notified of the delinquent assessment or connection charge for each of three months prior to the sale.
    2. 2.  The notice shall state that if the account is not brought current, the property will be sold at a foreclosure sale.
    3. 3.  The Department of Environmental Quality shall be given a copy of the foreclosure list at least three months before the sale.
  3. C.  A one-time penalty equal to one-half of one percent (.005) of the principal balance shall be added to the amount due at the date any assessment or installment payment becomes delinquent.  The penalty accumulates with each installment payment until the lien is brought current or paid in full.
  4. D.  Interest shall be added to delinquent liens and shall be calculated daily based on the amount of the unpaid principal balance and the interest rate set by the installment contract.
  5. E.  The Revenue Division may waive delinquent interest, penalties and charges if a delay in receiving payment is caused by an oversight, omission or error by City staff.
  6. F.  The Revenue Division is authorized to void the installment payment provisions of a sewer safety net contract, as follows:
    1. 1.  After a sewer safety net assessment becomes delinquent and prior to the Revenue Division placing the property on the foreclosure list, the Revenue Division may void the installment payment provisions and require the property owner to renegotiate new installment payment arrangements.
    2. 2.  After a sewer safety net assessment becomes delinquent and the Revenue Division has placed the property on the foreclosure list, the Revenue Division shall void the installment payment provisions and require the property owner to renegotiate new installment payment arrangements. 

5.31.027 Renegotiation of Installment Payment Contracts.

(Added by Ordinance 167655; amended by Ordinance 189413, effective March 6, 2019.) 

  1. When the Revenue Division declares the installment payment provisions of a sewer safety net contract void, the property owner may renegotiate new provisions to pay in installments the unbilled principal portion of the sewer safety net account.  The Revenue Division shall offer new installment contract terms and conditions which protect the City’s financial condition and assure the repayment of the sewer safety net account.  The Revenue Division shall set the interest rate on the renegotiated contract at a rate greater than or equal to the interest rate of the original installment payment contract.  The renegotiated installment contract shall be in the same form as required by Chapter 17.12 of this Code for assessment installment payment contracts.  The property owner or other interested party shall pay all delinquent assessment installments before the City will accept the renegotiated installment payment contract.

5.31.030 Preforeclosure Process and Review for Delinquent Tax Accounts.

(Amended by Ordinance 189413, effective March 6, 2019.) 

  1. A.  At the conclusion of the collection process, the Revenue Division shall prepare a list of delinquent lien accounts.  No property shall be placed on the list unless the payment is at least one year past due.  There shall be a sale at least once a year.
  2. B.  The Revenue Division shall determine whether any properties on the delinquent accounts list are also delinquent in the payment of property taxes.  The Revenue Division shall identify those properties which are likely to be foreclosed upon by the County prior to the City’s foreclosure sale.
  3. C.  The Revenue Division shall review the list of properties to be foreclosed upon by the County and shall make a recommendation to the Bureau of Environmental Services and Department of Environmental Quality regarding any properties which should be purchased.  The determination of whether to pay the taxes shall be based on whether the total amount of the liens and taxes on the property is less than the market value of the property or, if the property has been sold, whether the sale price received by the County was enough to pay the amount of the City liens upon resale.  The Department of Environmental Quality by written letter shall direct the City Treasurer on which properties shall be purchased by the City.
  4. D.  The City Treasurer shall remove from the County foreclosure list and notify the Revenue Division to add the total amount paid to the County to the lien against the property.  The City Treasurer shall pay the County from funds designated and provided by the Department of Environmental Quality.

5.31.035 Preparation of List.

  1. A.  All delinquent properties satisfying the requirements of this Chapter shall be placed on the preforeclosure list, unless a delay in the collections process has been authorized pursuant to Section 5.31.025 B above.
  2. B.  No property on the preforeclosure list shall be placed on the final foreclosure list until the following steps have been taken:
    1. 1.  The current property owners have been determined.  The record shall state how the property ownership status was determined.
    2. 2.  The property owner has received at least two written delinquency notices within a three-month period prior to the sale.  The notice shall be sent certified mail, return receipt requested and by first class mail.  The notice shall identify the property, the amount owing (principal, interest, penalties, and collection costs) and state the costs of the sale that will be charged to the account.  In addition, the notice shall identify the type of the delinquent lien account and the fact that the property will be placed on the foreclosure list unless the account is brought current.  The record shall contain a copy of the notice and the returned receipts.

5.31.045 Review of Final Foreclosure List.

(Amended by Ordinance 189413, effective March 6, 2019.) 

  1. A.  The Revenue Division shall transmit a copy of the final foreclosure list to each Commissioner and to the Department of Environmental Quality for review.  Any comments shall be transmitted to the Revenue Division within 15 working days from the date the Revenue Division sends the final foreclosure list to the Commissioners and Department.
  2. B.  The Council shall:
    1. 1.  Review the final foreclosure list and shall make a report to the Revenue Division regarding whether each step in the preparation of the final foreclosure list, as set forth in City Code 5.31.025 B. and 5.31.035 B. has been applied correctly.
    2. 2.  Review the list of properties which have been on the final foreclosure list but for which no bids were received and make a recommendation on each property to the Department of Environmental Quality regarding how the property should be handled in order to liquidate the lien; and
    3. 3.  Transmit to the Revenue Division the instructions from the Department of Environmental Quality regarding how to handle each property which has been placed on the final foreclosure list but not sold.
  3. C.  The Revenue Division shall:
    1. 1.  Prepare a report to the Council which identifies properties which have been deleted from the list based on the recommendations of the Commissioners;
    2. 2.  Transmit to the Council a list of properties which have twice been on final foreclosure lists and which have not sold together with the directions from the Department of Environmental Quality and Commissioners regarding how each property shall be handled; and
    3. 3.  Prepare a revised final foreclosure list for submission to the Council for Council action.

5.31.050 Council Action on Final Foreclosure List; Recording of Notice.

(Amended by Ordinance 189413, effective March 6, 2019.) 

  1. A.  The Council shall review the final foreclosure list and reports submitted by the Revenue Division to determine:
    1. 1.  Whether each step in the collection process as set forth in City Code 5.31.025 B. and 5.31.035 B. has been applied correctly; and
    2. 2.  The Council shall act by ordinance and shall identify for the Revenue Division and City Treasurer which properties should be placed on the final foreclosure list and as directed by the Department of Environmental Quality and the Council which properties on the list should be purchased by the City in the event no bids are received on those properties, and the source of the funds to be used to purchase the property. 
  2. B.  The final foreclosure list shall be transmitted to the City Treasurer by the Council Clerk.  After list is submitted to the City Treasurer, the only payment option is to bring the account current.
  3. C.  The City Treasurer shall record a Notice of Foreclosure and Sale for each property listed on the final foreclosure list in the County records in which the property is located before ordering a foreclosure report and before giving notice as required by City Code 5.30.065.  The notice shall contain the ordinance number adopting the final foreclosure list; the address and legal description of the property, the time, date and place of the sale, the types and amounts of assessments and that the property will be sold unless the account is brought current and all interest, penalties, collection costs and sales costs to date are paid.  It shall also state the name of the person and address and phone number where additional information is available.
  4. D.  The City Treasurer shall determine the names and addresses of all persons having an interest in the sale including lien holders and whether the property is part of a bankruptcy estate.  This may be done by purchasing a report from a title company.
  5. E.  Any property which is part of a bankruptcy estate shall be removed from the sale or the City Attorney should be requested to seek relief from the stay from the Bankruptcy Court. 

5.31.055 Notice to Persons on Final Foreclosure List of Foreclosure Action.

(Amended by Ordinance 189413, effective March 6, 2019.) 

  1. A.  Individual notice.
    1. 1.  The City Treasurer shall mail a “Notice of Foreclosure” to all persons having an interest in the property and to all persons requesting notice.  It shall be sent at least 60 days prior to the sale by certified mail, return receipt requested.
    2. 2.  The notice shall state that a foreclosure sale will be held and it shall specify the date, time and place.  It shall contain the following information: the names of the owners of the property, the legal description of the property, the street address, the amount of the delinquent account stating both the principal and interest due as well as any penalties and collection charges, the type of the delinquent account, and the name of the City Treasurer.  It shall also state that there shall be an additional charge.
    3. 3.  The City Treasurer shall retain and file the returned mailing receipt.
  2. B.  Newspaper notice.
    1. 1.  The City Treasurer shall have printed in a daily newspaper of general circulation the notice of sale once a week for four successive weeks.
    2. 2.  The notice shall contain the information required in City Code 5.31.055 A 2.
    3. 3.  A copy of the first of the four published newspaper notices shall be sent to the owner and to the occupant by certified mail, return receipt requested and a copy of the notice shall be retained in the file.
  3. C.  Posted notice.
    1. 1.  The City Treasurer shall have notice posted on the property at least once, no less than four weeks before the sale.  Proof of posting shall be maintained in the property foreclosure file.
    2. 2.  The notice shall contain the information required in City Code 5.31.055 A 2.
    3. 3.  The City Treasurer shall prepare an affidavit of posting and a copy of the affidavit shall be retained in the file.
  4. D.  Other notice.
    1. 1.  Notice shall be given to the Internal Revenue Service by certified mail, return receipt requested, at least 25 days prior to the sale. 

5.31.060 Purchase of Property by the City.

  1. A.  The City may purchase property on the final foreclosure list for City properties before, during or after the sale subject to the following conditions:
    1. 1.  The Department of Environmental Quality and the Council have directed the purchase of the property in the ordinance adopted under City Code 5.31.050 B, and the money has been transferred to the proper assessment fund;
    2. 2.  In the case of property purchased before the sale, any person having an interest in the property is given an opportunity to bring the account current and pay the collection and sales costs, and thereby remove the property from the list as provided by City Code 5.31.065 A; and
    3. 3.  Any person having an interest in the property may redeem the property as provided by City Code 5.31.085.

5.31.065 Payment of Lien and Presale and Sale Conditions.

(Amended by Ordinances 167655 and 189413, effective March 6, 2019.)

  1. A.  A person with an interest in the property may remove the property from the foreclosure list by paying the amount of the delinquent assessment with penalties, interest, collection costs and sales costs incurred to date any time prior to the sale.  In addition, in the case of installment payments, the Revenue Division shall void the installment provision of the sewer safety net contracts and require the property owner or interested person to renegotiate new installment payment arrangements as provided in this Chapter.  Payment plans as provided by PCC 5.30.035 may not be initiated as a means to bring the account current.  If requested, notice that the property has been removed from the sale, shall be recorded in the County records in which the property is located.
  2. B.  A bidder purchases the property “as is.”  There shall be no opportunity for an on site inspection of the land or buildings unless the bidder has permission from the owner. 

5.31.070 The Sale.

(Amended by Ordinance 189413, effective March 6, 2019.) 

  1. A.  The City Treasurer shall prepare rules governing the conduct of the sale.  The rules shall be available at least 60 days prior to the sale.
  2. B.  Each piece of property shall be sold separately .  The sales price shall be the amount owing on the principle, interest, penalties, collections costs and sales.
  3. C.  The interest charged during the redemption period shall be set by ordinance.  The interest rate shall be set at a level which attracts bidders, but shall be equal to or greater than the interest rate established for the Sewer Safety Net loans.
  4. D.  The penalty charged during the redemption period shall be set by ordinance.  It shall be set at a rate to encourage payment by delinquent property owners.
  5. E.  In situations where there are two or more bids, the successful bidder shall be determined by lot.
  6. F.  Property which is not sold may again be offered for sale.  The steps in City Code 5.31.050 D. through City Code 5.31.105 shall be followed.
  7. G.  In the event there is more than one bidder and the successful bidder fails to pay, the property shall be sold to the other bidder or in the event there were more than two bidders, the successful bidder shall be determined by lot. 

5.31.075 Certificate of Sale and Notice of Sale to Property Owner.

(Amended by Ordinance 189413, effective March 6, 2019.) 

  1. A.  The City Treasurer shall immediately deliver a certificate of sale to the purchaser.  The certificate of sale is a right to own the property at the end of the redemption period.  The holder of a certificate of sale has no ownership rights and no possessory interest in the property prior to the completion of the redemption period and holds the certificate of sale subject to the rights of all persons having an interest in the property to redeem it, the City to place additional liens on the property and the right of the right of another unit of government to foreclose upon the property.  All liability remains with the persons having an interest in the property until a deed is given to the purchaser.
  2. B.  The certificate of sale shall include the following information: a description of the delinquent account for which the property was sold, a description of the property, a statement of the amount for which it was sold, the interest rate and the amount of the penalty, the name of the purchaser, and a statement that the property is being sold subject to the right of redemption within one year from the date of sale.
  3. C.  The City Treasurer shall send to the property owner and all persons known to have an interest in the property a “Notice of the Sale” by certified mail, return receipt requested and by first class mail, within 10 working days after the sale.  Notice shall be sent to any persons known to have acquired an interest in the property since initial notice was given unless a notice was recorded.  The notice shall contain the following information: the name of the purchaser, the right of redemption, the date the redemption period expires, the redemption price, and the basis for calculating interest and penalties during the redemption period.
  4. D.  It shall be the responsibility of the purchaser to keep the purchaser’s current address on file with the City Treasurer. 

5.31.080 Lien Docket Entry.

(Amended by Ordinance 189413, effective March 6, 2019.) 

  1. A.  The City Treasurer shall return to the Revenue Division the final foreclosure list with all collections and sales noted on it within three business days after the sale.
  2. B.  The Revenue Division shall make the proper entries of the collections and sales in the appropriate lien docket.

5.31.085 Redemption.

(Amended by Ordinance 189413, effective March 6, 2019.) 

  1. A.  Any person having an interest in the property, or their legal representative, may redeem the property within one year from the date of sale.  The one-year period is computed as follows.  The date of the sale shall not be counted.  The period shall begin to run the day after the sale.  The last day of the one-year period shall be the 365th day at 5 p.m. on the next working day.  Purchasers have no redemption rights.
  2. B.  Redemption shall be subject to the payment to the City Treasurer of the amount of the property sale price , the interest to date and the penalty to date.  Property which has been sold at a foreclosure sale is not eligible for installment payments.  Property may be redeemed only by payment in full.
  3. C.  The City Treasurer shall issue a receipt to the person redeeming the property and shall report the redemption to the Revenue Division.  Redemption discharges the property from the effect of the sale.
  4. D.  If redemption is made by a lien creditor, the amount paid for redemption shall thereafter be deemed a part of the judgment, decree, mortgage or tax lien and shall bear like interest and may be enforced and collected as a part thereof.
  5. E.  Upon deposit of the sum in redemption, the City Treasurer shall issue a check or warrant for the amount paid to the holder of the certificate of sale shown o the lien docket for the amount of the delinquent account, costs and interest.

5.31.090 Issuance of Deed.

(Amended by Ordinance 189413, effective March 6, 2019.) 

  1. A.  Upon expiration of the redemption period, the City Treasurer shall execute a deed conveying the property sold.  The deed conveys to the grantee the legal and equitable title in fee simple.
  2. B.  The deed shall contain the following information: a description of the property, the date of sale, a statement of the amount of the delinquent account for which the property was sold, that the account was unpaid at the time of sale and that no redemption has been made.
  3. C.  The deed conveys title in fee simple excepting only for the liens of the City which were not included in the foreclosure sale or other liens as provided by state law.  The deed, however, does not guarantee clear title.
  4. D.  The grantee shall be entitled to immediate possession upon delivery of the deed.

5.31.095 Waste, Improvements to the Property, Nuisance Abatement Procedures.

  1. A.  The City shall not be responsible for damage to the property during the redemption period.  The purchaser assumes all risk.
  2. B.  Any improvements or maintenance to the property made by a purchaser during the redemption period shall be made by a contractual agreement with the owner.  The contract shall specifically state the amount owing and the rate of interest, if any.
  3. C.  In the event the property becomes a public nuisance, the City reserves the right to enforce its nuisance abatement code provisions which may result in additional assessments against the property and which may become the liability of the purchaser.
  4. D.  The property may also become subject to special assessments.

5.31.100 Payment of Taxes.

  1. A. Property subject to delinquent property taxes may be sold by the County at a sheriff’s sale.  In the event the property is sold, the purchaser may lose all interest in the property.  Any purchaser of property having delinquent property taxes may elect to pay the property taxes.  There shall be no reimbursement from the City in the event of redemption by the property owner.

5.31.105 Sale of Property.

(Amended by Ordinances 181483 and 189413, effective March 6, 2019.) 

  1. A.  Any property purchases by the City from the foreclosure list may be sold as directed by the Council by the OMF Business Operations Division in the manner provided by the Charter or state law.  The proceeds from the sale shall be used to reimburse the fund from which the property was purchased, any liens paid or other expenses incurred.  Any remaining proceeds shall be placed in the Assessment Referral Account unless otherwise designated by Council.
  2. B.  Except in situations where the purchaser agrees to accept a quit claim deed, the City Treasurer shall purchase title insurance as a precondition of sale and shall pay the cost of the policy.
  3. C.  In cases where the title report shows a defect in title, the defect shall be referred to the City Attorney.  The City Attorney shall take the steps necessary to clear the title.

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