Imagine losing your home and all your equity because you failed to pay a $500 water or sewer bill.

As dozens of cities and towns in Massachusetts turn to for-profit companies to go after delinquent taxpayers and balance their books, the consequences can be harsh – big legal fees, high interest rates and even foreclosures and evictions.

The New England Center for Investigative Reporting found that one Boston company buying up these tax liens has more than doubled its rate of foreclosures against Massachusetts property owners. This is the first in a series.

Cut into a steep hillside in Worcester just a block off the campus of Holy Cross College, Caro Street is home to boxy duplexes and triple-deckers rented out to students.

Paul Meaney owns four of them and almost lost them all. “I didn’t just fall off the turnip truck. And if this could happen to me, it could happen to anybody.”


Meaney didn’t pay the water and sewer bills on the properties. He thought those bills were covered under the escrow set up with his lender. And he’s a financial planner.

A 1996 state law allows cities and towns to sell off their delinquent taxes or utility bills – both known as tax liens – to third-party companies. Looking at records from the cash-strapped< cities of Worcester, Lowell, New Bedford, Pittsfield and Quincy, the New England Center for Investigative Reporting found these cities sold off more than 1,300 tax liens to investors, recovering nearly $10 million over the last 5 years.

As dozens of cities and towns in Massachusetts turn to for-profit companies to go after delinquent taxpayers and balance their books, the consequences can be harsh: big legal fees, high interest rates and even foreclosures and evictions.

“I mean I understand city of Worcester to some degree. They are entitled to the money,” said Meaney. “But I don’t think everyone else should be completely wiped out in the process. And that’s the only system that exists.

Cities and towns are happy to sell off tax liens to investors because they get a hundred percent  of what they’re owed in taxes plus the fees and interest – and sometimes more. The city of Lowell got a premium payment of $96,000 when it auctioned off tax liens to a private investor in 2012.

Unlike being delinquent on other types of bills where a debt collector gets involved …. this system means property owners like Meaney who get behind in taxes – no matter how small – can lose everything.

The investor can take the house. And that’s what happened to Paul Meaney with one of his four properties.

“You know we were in the middle of a family medical crisis at the time. I never saw anything, I had no idea this was going on,” he said.

The unpaid water and sewer bills on one of Meaney’s houses totaled $492.51. A Boston-based investment company called Tallage LLC bought the tax lien in the spring of 2011 from the city of Worcester for $1,052.84 -- the amount Meaney owed after interest and late fees assessed by the city.

The market value of Meaney’s house was more than $270,000 when Tallage got lien.

Tallage refused Meaney’s efforts to pay back the debt and reach a settlement on the legal costs and fees, according to a Land Court judge. In a 3-day trial, Meaney argued that his wife’s MS diagnosis and other troubles at home were the main reason he didn’t see notices from the city and Tallage about unpaid bills.

The Land Court reversed the foreclosure judgment and ordered Meaney to pay just under $5,000 to get his house title back. That didn’t include the tens of thousands he had to pay his own lawyer.

Meaney is still bitter: “There’s got to be other remedies for them to get their money than to just throw these titles out to these dogs.”

Andrew Kahrl, a professor at the University of Virginia, has studied tax lien sales across the country. He says the industry preys on people in distress and has a profit incentive not to communicate with homeowners.

“Keeping property owners in the dark is foundational to their strategy. Because it gives them more leverage. And fear and confusion have long been hallmarks of this sort of trade.”

But Worcester officials say their approach doesn’t leave anyone in the dark. The city’s chief financial officer Thomas Zidelis says he goes on an aggressive campaign to notify delinquent taxpayers about the severe risks of a tax lien. And he doesn’t think it’s unfair to hold delinquent taxpayer accountable, no matter how small the bill.

At minimum, there’s 12 notifications before we even commence the tax lien process,” said Zidelis. “In terms of fair, that’s a matter of opinion. The statute allows for that as a means of collection.

Worcester sells many of its tax liens to Tallage, a company  run in downtown Boston by real estate investor William Cowin.

Tallage has emerged as the dominant player in the state, buying up more than 2,000 tax liens from 30 cities and towns since its founding eight years ago. In the past 2 years, Tallage doubled the number of property foreclosures it won statewide compared to the previous 2 years.

Tallage’s general counsel Daniel Hill said that most of the properties it forecloses on are aren’t owner-occupied and that most the tax liens it buys are ultimately redeemed by property owners. He said his company helps cities and towns recoup lost revenue needed to pay for public services like schools.

Helping communities recoup lost revenue is what motivated lawmakers back in the mid-90s to enable this practice of selling tax liens to investors.

The budget crisis of the early 90s had left us strapped for bringing money back to cities and towns,” said Daniel Bosely, a former legislator from North Adams, who wrote the state law. He said it was a creative revenue generator. But looking back, he’s now concerned about the impact on some taxpayers caught in the system his legislation helped create.

Taxpayers like Paul Meaney. Meaney got his property back in a costly court battle, but not everyone is so fortunate. Tax lien foreclosures have led to dozens of eviction cases across the state in recent years. In day two of the series, we look at the ripple effect on renters.

This story, Part 1 in a series, aired on WGBH 89.7.