Current through Register Vol. 50, No. 9, March 1, 2024
NECESSITY, FUNCTION, AND CONFORMITY:
KRS
134.128(2) requires the
Department of Revenue to promulgate administrative regulations to establish a
process for the purchase and sale of certificates of delinquency to third
parties. This administrative regulation establishes the process for the
purchase and sale of certificates of delinquency to third parties.
Section 1. Definitions.
(1) "Clerks fees" means any fee required to
be collected by a county clerk for the filing, recording, release, processing,
or other handling of a certificate of delinquency or a lien created by a
certificate of delinquency.
(2)
"Control" means:
(a) Ownership of, or the
power to vote, directly or indirectly, twenty-five (25) percent or more of a
class of voting securities or voting interests of a registrant or applicant, or
a person in control of a registrant or applicant;
(b) The power to elect a majority of
executive officers, managers, directors, trustees, or other persons exercising
managerial authority of a registrant or applicant;
(c) The power to exercise influence, directly
or indirectly, over the management or policies of a registrant or
applicant;
(d) Holding the position
of an officer, director, general partner, or managing member of the registrant
or the applicant or in a position of similar status or performing similar
duties and functions of the registrant or the applicant; or
(e) Being entitled to receive twenty-five
(25) percent or more of the profits from the registrant or applicant.
(3) "Current certificate of
delinquency" means a certificate of delinquency which relates to the most
recent tax year and which has not been offered in a prior year's county clerk's
sale.
(4) "Department" means the
Kentucky Department of Revenue.
(5)
"Person" means any individual, corporation, business trust, estate, trust
partnership, limited liability company, association, organization, joint
venture, government or any subdivision, agency or instrumentality thereof, or
any other legal or commercial entity.
(6) "Priority Certificate of Delinquency"
means a current certificate of delinquency which relates to a property on which
a potential purchaser already owns a prior year certificate of
delinquency.
(7) "Protected
Certificate of Delinquency" means a certificate of delinquency which is:
(a) Currently involved in
litigation;
(b) Part of an ongoing
bankruptcy proceeding of which the county clerk has received actual notice;
or
(c) The subject of an agreed
payment plan in good standing.
(8) "Related entities" or "related interests"
means a relationship between two persons in which a person:
(a) Can exercise control or significant
influence over another person;
(b)
Is related by blood, adoption, or marriage to another person;
(c) Controls or is controlled by another
person; or
(d) Is an agent or
affiliate of another person.
(9) "Sale" means the annual sale by the
county clerk of certificates of delinquency to third party
purchasers.
Section 2.
Establishing Sale Date.
(1)
(a) The Department of Revenue shall develop a
preliminary statewide schedule for certificate of delinquency sales and shall
notify each county clerk on or before May 1 of each year of the proposed date
of the county's sale.
(b) A county
clerk may, within five (5) business days of notification of the preliminary
schedule, make a written request to the department to change the proposed sale
date for his or her county.
(c)
Date changes shall be made solely in the discretion of the
department.
(d) Any adjustments
shall be made after consultation with the county clerk and shall be completed
on or before May 15 of that same year.
(e) The department shall publish the final
sale schedule as soon as practicable after May 15 of each year.
(2)
(a) The county clerk shall notify the county
attorney of the sale date as soon as practicable after May 15 of each
year.
(b) Between ten (10) and
fifteen (15) days prior to the sale date, the county attorney shall provide the
county clerk a list of all protected certificates of delinquency.
(c) A certificate of delinquency included on
the protected list shall not be sold at the county clerk's sale.
(3) Except as provided in
KRS
134.127, the county clerk shall not assign
any current certificate of delinquency prior to the sale.
Section 3. Purchaser's Registration with the
County Clerk.
(1) A third party purchaser
shall register with the county clerk prior to participating in the county's
sale. A new registration shall be required for each year's sale.
(2) A third party purchaser's registration
shall include:
(a) The purchaser's name,
physical address, mailing address and phone number;
(b) A copy of the Certificate of Registration
required by
103
KAR 5:190;
(c) A list of the priority certificates of
delinquency the purchaser intends to purchase. This list shall be clearly
marked and shall include the total amount due for all priority certificates of
delinquency listed and the following information for each priority certificate
of delinquency listed:
1. The current year's
tax bill number;
2. The taxpayer
name;
3. The amount due on the
current certificate of delinquency;
4. The prior year certificate of
delinquency's tax bill number;
5.
The prior year certificate of delinquency's tax year;
6. The book and page numbers where the prior
year certificate of delinquency is filed, if applicable;
7. The account or parcel identification
number if the county uses that number to identify specific properties;
and
8. If requested by the county
clerk, a copy of the prior year certificate of delinquency;
(d) A list of the current
certificates of delinquency the purchaser intends to purchase. This list shall
be clearly marked and shall include the total amount due for all certificates
of delinquency listed and the following information for each certificate of
delinquency listed;
1. The taxpayer
name;
2. The amount due on the
certificate of delinquency;
3. The
current year's tax bill number; and
4. The account or parcel identification
number if the county uses that number to identify specific
properties.
(e) The
following sworn statement: "I hereby certify that I am not participating in
this sale in conjunction with any related person or related entity to obtain
any advantage over other potential purchasers at the sale.";
(f) The deposit required by the county clerk
pursuant to Section 4 of this administrative regulation; and
(g) Payment of the registration fee of five
(5) dollars for each certificate of delinquency included on the purchaser's
list of priority certificates of delinquency and ten (10) dollars for each
certificate of delinquency included on the purchaser's list of current
certificates of delinquency. The total registration fee shall not exceed
$250.
(3)
(a) Except as provided by paragraphs (b) and
(c) of this subsection, the registration material required by subsection (2) of
this section shall be submitted to the county clerk no later than fifteen (15)
days prior to the sale.
(b) The
deposit required by Section 4 of this administrative regulation shall be
submitted to the county clerk no later than five (5) days to the
sale.
(c) The list of current
certificates of delinquency required by subsection (2)(d) of this section shall
be submitted to the county clerk no later than ten (10) days prior to
sale.
(d) The county clerk shall
include these deadlines in all advertisement required by
KRS
134.128(5).
(4) Prior to the sale, the county clerk
shall:
(a) Review each registration and
confirm that each registrant has complied with
KRS
134.129 and that related entities or related
interests are not participating or attempting to participate in the sale in a
manner designed to subvert the fairness of the sale or to deprive other
participants from an equitable opportunity to purchase certificates of
delinquency at the sale. If the county clerk determines that a purchaser has
violated or has attempted to violate this section, the county clerk shall
notify the county attorney and the Department of Revenue of the violation or
attempted violation;
(b) Review all
the lists of priority certificates of delinquency for purchase submitted by
purchasers to verify that the registrant has a priority right to purchase the
listed certificates of delinquency;
(c) Review the submitted priority purchase
lists to identify multiple purchasers interested in the certificates of
delinquency on the same property and, based upon the information submitted,
determine the registrant that holds the prior year claim for the most recent
tax year; and
(d) No later than
forty-eight (48) hours prior to the sale, make available to each third party
purchaser registered for the sale, copies of all lists of priority certificates
submitted pursuant to subsection (2)(c) of this
section.
Section
4. Deposit Requirement.
(1) A
purchaser shall deposit funds with the county clerk at the time of registration
in the following amounts:
(a) 100% of the
value of each certificate of delinquency included on the purchaser's list of
priority certificates of delinquency;
(b) All clerk's fees associated with each
certificate of delinquency included on the purchaser's list of priority
certificates of delinquency;
(c)
Twenty-five (25) percent of the value of each certificate of delinquency
included on the purchaser's list of current certificates of delinquency. A
purchaser shall not be required to pay an additional deposit if the certificate
of delinquency is included on both lists, and if both lists clearly indicate
that the certificate is included on both lists. A purchaser may deposit more
than the minimum amount required by the county clerk.
(2) The county clerk shall apply the deposit
to payment of any certificate of delinquency purchased at the sale.
(3) The county clerk shall refund any unused
portion of the deposit to the purchaser no later than ten (10) business days
after the completion of the sale.
(4) The county clerk shall:
(a) Accept payment of the deposit in a method
of payment that complied with
KRS
134.126(1)(b); and
(b) Not require that a deposit be made in
cash. inadequate deposit, the county clerk shall allow the third party
purchaser an opportunity to submit additional funds to reach the correct
deposit amount. The deposit shall be paid in full by the day of the
sale.
Section
5. Payment.
(1) Payment of any
outstanding balance, after application of all deposits, shall be made at a time
determined by the county clerk, but no later than ten (10) business days after
the sale. The total amount due shall include all clerk's fees for all
certificates of delinquency purchased at the sale.
(2) The county clerk shall:
(a) Accept payment of the deposit in a method
of payment that complied with
KRS
134.126(1)(b);
(b) Not require that a deposit be made in
cash; and
(c) Include a list of the
acceptable forms of payment in all advertisements for the sale.
(3)
(a) If full payment is not made for the
certificates of delinquency at the time designated by the county clerk, the
county clerk shall not assign any certificate of delinquency for which full
payment has not been received and those certificates of delinquency shall be
available for payment pursuant to
KRS
134.127(1)(b).
(b) The county clerk shall have discretion as
to how to allocate partial payments.
(c) If the purchaser's failure to make
payment results in additional cost or expense to the county clerk, the county
clerk shall forfeit the purchaser's deposit to cover those additional costs and
expenses.
Section
6. Conduct of the Sale.
(1)
(a) The county clerk may sell the requested
priority certificates of delinquency to the purchasers who submitted a list
prior to the sale at the beginning of the sale, or as soon as practicable after
the sale.
(b) The purchaser holding
a certificate of delinquency from the most recent tax year shall have
priority.
(c) If a purchaser
holding a certificate of delinquency from the most recent tax year declines to
purchase the priority certificate of delinquency, the purchaser holding a prior
certificate of delinquency from the next most recent year shall be allowed to
purchase the certificate of delinquency if included on their list of priority
certificates of delinquency.
(2)
(a) The
certificates of delinquency remaining at the time of the sale shall be sold as
established by subsection (3) of this section.
(b) The order of selection of lots by
registered purchasers shall be determined by a random drawing on the day of the
sale.
(c) The purchaser who draws
the lowest number during the random drawing shall have the first turn to choose
a lot for purchase. Thereafter, purchasers shall select lots to purchase in
order based on the random drawing from lowest to highest.
(d) Purchasers who are not present for the
random drawing shall be placed at the bottom of the selection list behind the
purchasers who were present for the random drawing.
(3)
(a)
Except as provided in paragraph (b) of this subsection, the certificates of
delinquency remaining at the time of sale shall be sold in lot sizes as
follows:
1. In counties with 500 or fewer
certificates of delinquency to be sold, the certificates of delinquency shall
be sold in lots of up to five (5);
2. In counties with more than 500 and less
than 1,000 certificates of delinquency to be sold, the certificates of
delinquency shall be sold in lots of up to ten (10);
3. In counties with at least 1,000 and not
more than 2,500 certificates of delinquency to be sold, the certificates of
delinquency shall be sold in lots of up to twenty-five (25);
4. In counties with at least 2,500 and not
more than 7,500 certificates of delinquency to be sold, the certificates of
delinquency shall be sold in lots of up to fifty (50); and
5. In counties with more than 7,500
certificates of delinquency to be sold, the certificates of delinquency shall
be sold in lots of no more than fifty (50) for the first four (4) rounds, and,
for all subsequent rounds, shall be sold in lots not to exceed two (2) percent
of the total number of current certificates of delinquency included in the pool
for the sale.
(b) For any
round of a sale, if, there are more certificates of delinquency to be sold than
purchasers participating in the sale, the lot size used for that round shall
not create fewer lots than the number of purchasers
participating.
(4) The
county clerk shall set a reasonable time limit for purchasers to make their
selections.
(5) A purchaser may
withdraw from the sale at any time prior to completion of the sale. If a
purchaser withdraws from the sale, the purchaser shall not make any further
purchases in any later round of the sale. Another purchaser shall not take the
place of the withdrawing purchaser.
(6) A purchaser may purchase less than a full
lot of certificates of delinquency. If a purchaser purchases less than a full
lot in three (3) consecutive rounds, the purchaser shall be considered to have
withdrawn from the sale after the partial lot purchase.
(7)
(a) The
county clerk shall apply the purchaser's deposit to the total amount due for
the certificates of delinquency purchased.
(b) The purchaser shall pay any additional
funds required on or before the payment deadline established by the county
clerk pursuant to Section 4 of this administrative regulation.
(c) The total amount due shall include all
clerk's fees for all certificates of delinquency purchased at the
sale.
(d) Any amount of deposit
remaining after the sale shall be refunded to the purchaser.
(8) Purchasers shall only purchase
those certificates of delinquency listed on the registration required by
Section 3 of this administrative regulation.
(9) Any questions or controversies relating
to the sale shall be addressed by the county clerk.
Section 7. Department of Revenue Oversight.
The Commissioner of the Department of Revenue or his or her duly appointed
representative shall have access to all sales and shall be permitted to review
or audit the records relating to the sale of certificates of
delinquency.