When Ms. B first came to Legal Aid for help nearly two years ago, she was at risk of losing her family home where she and her sister reside. Ms. B and her sister, who is disabled, inherited the home when their mother passed away a few years earlier. Ms. B’s parents had bought the home in the late 1950s. The mortgage was paid off decades ago, and Ms. B continued to pay the real property taxes owed each year.
However, because the deed to the home was never properly transferred from Ms. B’s parents to Ms. B., the D. C. Office of Tax Revenue (OTR) determined after an audit that the “homeowner” (technically Ms. B’s mother) was no longer living in the home. That triggered a new tax assessment when OTR retroactively stopped applying the homestead deduction to the yearly tax bill, and applied penalties and interest with respect to the increased amount of taxes.
Because only “homesteads” are eligible to receive the deduction – a homestead being defined as a residential property owned by an individual that is also that individual’s principal residence – OTR's position was that Ms. B's house stopped being entitled to the deduction after her mother passed away, even though Ms. B was entitled to receive the property according to her mother's will and had continuously lived in the home. When Ms. B could not immediately pay the over $6,000 in back taxes, penalties and interest following the audit, a lien on her property was sold to an investor at a tax sale auction, who agreed to pay the back taxes in exchange for an opportunity to foreclose on the property and the right to receive interest payments.
The problem? No one had told Ms. B that her home was going to be sold, or even that it had been sold. Instead, Ms. B first learned about the tax sale when the purchaser served her with a complaint to foreclose her right of redemption. If the purchaser prevailed in this action in D.C. Superior Court, it would have had free and clear title to Ms. B’s family home, and Ms. B would have lost all of her equity in the house because of the unpaid tax bill.
As compelling as Ms. B’s situation was, we unfortunately lacked the resources at Legal Aid to represent her, in part, because we don’t have in-house tax expertise. So, we reached out to lawyers who knew more about that area of law for help. Fortunately, Miller & Chevalier attorneys Andrew Howlett and George Hani volunteered.
Andrew and George assisted Ms. B in managing the probate process so that the house was deeded in her name. They also filed a protest with OTR challenging the retroactive denial of the homestead deduction, and eventually were successful in persuading OTR to forgive a significant portion of the penalties and interest imposed on Ms. B. Meanwhile, Andrew appeared at several hearings before the D.C. Superior Court Magistrate Judge handling tax lien cases and delayed the foreclosure proceedings, affording Ms. B enough time to earn the money she needed to pay the back taxes and redeem ownership of her home.
Inspired by his experience representing Ms. B, Andrew wrote an article entitled, The D.C. Homestead Deduction: Traps for the Unwary and Suggested Reforms, which was published in the March 2014 edition of the Washington Lawyer.
It is no exaggeration to say that Miller & Chevalier’s representation was truly life-changing for Ms. B and her sister who otherwise very likely would have lost the home that their family had owned for over a half-century.