By Kevin Slovinsky
In April 2024, I received a phone call from an elderly Black woman from Kentucky who explained to me that the property tax on her property was just paid by a company she had never heard of. The woman, whom we can call Sally, called LiKEN Knowledge to ask if it had been a charitable donation or if she was legally required to reimburse the company, whose name she could not remember. The situation was certainly strange to her but was complicated by the fact that her property wasn’t just her property, it was heirs’ property and was collectively owned by dozens of other family members. The property had at one time been owned by her aunt but she had passed away and, without a valid will, the children of her 10 deceased siblings inherited undivided interests in the property and collectively owned the property as co-tenants. Although Sally’s aunt had died about a decade ago, she was still the owner of record according to both the deed and the Property Valuation Administrator. Without a clear picture of who owned the property, the idea that a company would pay the property taxes on behalf of the heirs wasn’t out of the realm of possibility for Sally …but puzzling nonetheless. So, she asked a family friend to look online for somebody to help and that is how she came across LiKEN Knowledge and my phone number.
Why would she call LiKEN though? Well, LiKEN Knowledge operates the Appalachian Heirs’ Property Center (AHPC), a free technical assistance program for heirs’ property owners in Kentucky in West Virginia. The AHPC primarily serves to help heirs’ property-owning families to acquire a clear title to their property. That means creating a family tree to identify everyone who owns an interest in the property, contacting them, and helping them consolidate their interests in one entity — either a single individual, LLC, or Trust — so that they can draft a deed that clearly indicates who owns the property. Without a clear title to their property, heirs’ property owners are vulnerable to losing their land due to predatory partition actions or, as will be covered here, property tax delinquency. Moreover, they are unable to receive the full benefits that come with land ownership. For example, most heirs’ property owners are less able to leverage their property to acquire a loan, grant, or financial assistance. They are also desensitized to modify the property in any way that “wastes” the property,” which includes cutting down trees. By providing title clearing technical assistance, we aim to protect families’ claims to their land and make it easier for them to utilize their land in a way that sustainably builds generational wealth. While title clearing technical assistance is the main service we offer heirs’ property owners, we are problem solvers and are happy to help them in any way we can. When heirs encounter problems that exceed our abilities, we make referrals and/or directly connect them with people that can help.
In Sally’s case, I didn’t have to make a referral because I knew exactly what had
happened. Her family had failed to pay the property taxes for their heirs’ property, allowing their property to lapse into delinquency. In other words, they failed to pay their debt to the county government. Accordingly, the county clerk sold the debt as a “certificate of delinquency” to “third-party purchasers of certificates of delinquency,” a fancy name for debt-collection companies that invest in delinquent property taxes. I was able to quickly confirm this by calling the clerk’s office in the county where her heirs’ property was located. Moreover, the county worker informed me that the company that bought Sally and family’s certificate of delinquency was none other than Mid South Capital Partners, a company I know well as the most aggressive purchaser of certificates of delinquency in Kentucky.
Sally and her family had fallen prey to a 21st century financial system that dispossesses peoples’ land. This system, the privatized market for property tax debt, has received little attention from scholars and community organizers but is wreaking havoc on rural people in Kentucky that are ‘land rich but cash poor.’ Land ownership is the foundation for building generational wealth and Kentucky’s system for collecting property taxes inequitably impacts non-commercial owners and, specifically, heirs’ property owners.
I will return to Sally’s situation and tell the full story (spoiler: it has a good ending for the family) but I first want to step back and explain how this system works and how it impacts heirs’ property owners.
In 2009 the Kentucky General Assembly unanimously passed House Bill 262, creating a new — effectively privatized — system for collecting delinquent property taxes. As of 2024, this is how it works. Sheriff departments mail tax bills to the property owner’s mailing address recorded by the Property Valuation Administrator, the office in charge of assessing property value. If the taxes are not paid to the sheriff by January 1 of the year immediately following the tax year, the property taxes are marked as delinquent and acquire a 10% penalty fee. Approximately four months after they become delinquent, county sheriffs transfer the delinquent taxes to the county clerk’s office where they become “certificates of delinquency” which can be bought and sold as a commodity. If a delinquent taxpayer pays the taxes at this point, the money will go directly to the county government and will ultimately fund things like public schools and roads. If the tax is paid after the certificate of delinquency is sold to a "third-party purchaser of certificates of delinquency," the money goes directly to them. At the moment of sale, the county clerk exits the relationship triangle.
The first sale of certificates happens in the summer when the county clerk holds an auction open to third-party purchasers. Clerks report how many certificates were sold during the auction to the Kentucky Department of Revenue (KDR) who then publishes a spreadsheet of the information online. The certificates that were not sold remain available for sale indefinitely in the county clerk's office after the auction. This is important to note because some counties sell very little or no certificates of delinquency during their annual auction but do sell dozens of certificates during the remainder of the tax year. Certificates can be bought years after the tax year they were created. Certificates that are not sold during the auction, however, are not recorded and made publicly available by the KDR. This not only means that the KDR spreadsheet of certificates is an inaccurate depiction of the certificate of delinquency market, but also that it conceals the reality that people in certain counties are being disproportionately targeted by debt collectors. For example, Martin County sold only 30 certificates between 2023 and 2017 according to the KDR's spreadsheet but it has a very active certificate of delinquency market; the third-party purchasers buy certificates in the months after the auction and so those sales go unrecorded by the KDR.
When a certificate is sold to a third party purchaser, the property owner no longer owes the county government any money but rather, the third party purchaser. With a certificate of delinquency in their possession, third party purchasers are empowered by KRS 134.125, 134.546, 134.490 to demand that the delinquent taxpayer pay them the amount the third party purchaser spent to buy the certificate plus a 12% per annum interest rate and pre litigation fees or risk having the third party purchaser file a foreclosure action. If the delinquent taxpayer does not pay their debt before the end of the foreclosure suit and the judge orders the property foreclosed upon, the property will be sold by the Master Commissioner at a public auction, typically at the courthouse steps. It is a common belief that foreclosing on a property transfers ownership to the foreclosing party (i.e. plaintiff and, in this case, the third party purchaser) but that is untrue. Foreclosure puts the property up for auction and the proceeds of the auction are used to pay the third party purchaser the amount necessary to resolve the debt. That being said, it is common for third party purchasers in Kentucky to purchase the property they foreclosed upon at the Master Commissioner auction at an obscenely low price. LiKEN Community Engagement Coordinator Madison Mooney witnessed a third-party purchaser buy a 160-acre heirs' property parcel for $7,000 at a Master Commissioner auction in Martin County. All of the above also applies not only to surface properties but also mineral properties that are severed from the surface. For example, Taxco LLC is a third party purchaser that is a subsidiary of Pilgrim Energy, a West Virginia-based gas and oil company. In the late 2010s, Pilgrim consistently purchased mineral properties foreclosed upon by their subsidiary Taxco. Keep in mind that a third-party purchaser effectively pays themself to resolve the debt and obtain the property when they buy the foreclosed upon property at the Master Commissioner auction . Whatever money is left after the debt is resolved goes to the property owner or the county’s unclaimed funds collection.
When or whether a property is foreclosed upon or bought at auction by the foreclosing party depends entirely on who the third party purchaser is. Some third party purchasers are private individuals who are looking to acquire a specific property. Other private individuals engage in the certificate market as investors and act like companies do but without the protections of incorporation. The most prominent third-party purchasers, however, are companies that register themselves as purchasers with the KDR. Registering as a purchaser allows them to go beyond the purchasing limit set by the General Assembly (3 certificates in a county, 5 in the commonwealth). Of the dozens of third party purchasers registered to buy certificates of delinquency in Kentucky, a handful of particularly active companies dominate the market. Mid South Capital Partners, the company that bought Sally’s certificate, is the most prominent of them all. Mid South Capital Partners is, compared to their peers, quick to foreclose on properties once they purchase the certificate of delinquency. Moreover, they regularly purchase the properties they foreclose upon at Master Commissioner auctions. According to my research, Mid South Capital Partners owned 271 properties in Kentucky in February 2024, most of which were small acreage parcels. It is as of yet unclear how they acquired all of these properties but research into a sample of these properties suggest that at least a majority of them were acquired at Master Commissioner auctions. The real kicker, however, is that once they purchase a property at a Master Commissioner auction, Mid South allows their property to become tax delinquent. That’s right. According to 2024 public tax delinquency records, Mid South Capital has not paid property taxes on dozens of properties in Kentucky. As of May 3, 2024, they had not paid property taxes on eleven properties in just Johnson and Martin counties that are cumulatively worth about $1,850 in unpaid taxes.
For a company that owned more than 250 properties in 2024, it is puzzling to me why they do not pay their property taxes. It is possible that they allow their properties to become delinquent because they know that they are the enforcers of property tax law. Since the privatization of the property tax collection system, county governments have seemingly taken a backseat to foreclosing on delinquent properties. County governments can compensate for the lost tax revenue by selling the certificates to third party purchasers and allow them to invest their own resources to foreclose on delinquent properties. While it is possible that another third party purchaser other than Mid South could purchase the certificates of delinquency of Mid South’s properties, my preliminary research of public records collected from Martin County indicate that registered third party purchasers rarely buy certificates on properties owned by commercial entities. This is likely because commercial properties are, on average, significantly larger and their certificates more valuable than non-commercial properties. This is especially true in eastern Kentucky where land holding, timber, and energy companies own about fifty percent of some counties’ acreage. Moreover, if the third party purchaser’s goal is to acquire the property at auction, they have a greater chance of succeeding if they target properties owned by working-class people who are less likely to have the money on hand to pay their property tax plus whatever interest they accrued.
It is clear that non-commercial landowners are adversely affected by Kentucky’s privatized system for delinquent property tax collection simply because commercial property tax debt is ‘too big to buy.’ However, a subsection of non-commercial landowners — heirs’ property owners — are particularly impacted by this system. How so? Well, it goes back to what I said about sheriff departments mailing tax bills to property owners using the mailing address recorded by the Property Valuation Administrator (PVA). PVAs vary significantly county by county generally, they do not update the “owner name” or “mailing address” they have on record for a property unless the current owner(s) tell them that the name or mailing address of the property owner has changed. It is therefore commonplace for the PVA record for an heirs’ property to have a deceased person as the owner of record, occasionally followed by “heirs” or “et al” to mark its status as heirs’ property. The mailing address, meanwhile, is either outdated or an approximate geographical location like “right fork of Maces Creek.” Nevertheless, sheriff offices send the tax bill to the mailing address on record at the PVA’s office and when the property taxes go unpaid, the debt is transferred to the county clerk’s office as certificates of delinquency to be sold to third-party purchasers. When the third-party purchasers acquire a certificate, they follow the regulations established in KRS 134.490 and send a notice to…the mailing address kept on record at the PVA’s office. If they move forward with foreclosing on the property, they again send a notification to the same mailing address. When they file the foreclosure complaint with the circuit court, the circuit court hires a Warning Order Attorney (WOA) to notify anyone with an interest in the property. So, the WOA sends a notice to the mailing address kept on record at the PVA’s office.
Image caption: Public notices section of the January 31, 2024 publication of the Mountain Citizen, a newspaper in Martin County, where Warning Order Attorney Jeffrey Hinkle posted more than a dozen foreclosure notices to unknown heirs' property owners.
When the notice bounces back because of a faulty address, the WOA posts a public notice in the local county newspaper. LiKEN has kept records of 400 heirs’ property tax foreclosures across 22 eastern Kentucky counties from 2014 to 2024 and analyzed the case files for three of the counties so far. Time and time again we have seen notices sent to non-addresses like “right fork of Maces Creek.” Heir’ property owners are particularly affected by Kentucky’s privatized system for property tax collection because sheriffs, third-party purchasers, and Warning Order Attorneys — all of whom rely on PVA data — cannot or do not notify heirs that their property taxes are due, delinquent, or the grounds by which they may lose their property.
Now that I have expounded upon Kentucky’s system for property tax collection and its inequities, I would like to return to Sally’s situation. Shortly after my first call with Sally, I learned that Mid South Capital Partners had bought seven years worth of delinquent tax debt worth a little more than $3,000 from the county clerk. Sally was shocked when I told her. She had no idea that the property taxes had not been paid for seven years and that the debt could be sold off to a private company. All of the heirs’ she was aware of and in contact with were on fixed incomes and could not afford to release the lien. Nevertheless, they desperately wanted to keep their multigenerational land in the family. A couple of weeks after our first call, I met with several of Sally’s family members via Zoom and explained the situation. I promised I would look for a funding source that could cover the cost of releasing the lien. At this point, I was well beyond the services LiKEN typically offers through the Appalachian Heirs’ Property Center but we were committed to helping Sally’s family any way we could. I reached out to a former professor of mine who works on land justice issues who, in turn, connected me to a Lexington-based social justice activist. In a ‘small world’ moment, the activist happened to know the affected family as they were members of her father’s church (that’s just how it goes in Kentucky). The activist connected me and the family to staffers at the Highland Center, the famous school for civil rights and labor organizers that includes alumni such as Martin Luther King Jr. and Rosa Parks. The Highlander Center was able to directly pay the heirs $4,000 from a mutual aid fund they host. Since then, the family has received the money and paid Mid South Capital Partners the amount needed to release their lien. Now that their property is not at risk of foreclosure, the family is creating a plan to regularly pay their property taxes. Not only that but they are working with LiKEN’s Appalachian Heirs’ Property Center to acquire a clear title to their property and apply for cost-sharing programs to utilize their land.
While Sally and her family were able to release the lien on their property, escape the threat of foreclosure, and even use the momentum to start the title clearing process, the same cannot be said for hundreds of similarly situated heirs’ property owners in Kentucky. A privatized market for property tax debt threatens to exacerbate land ownership inequality, especially in eastern Kentucky where absentee corporations have long dominated the land ownership profile. The ‘old guard’ land owning corporations of eastern Kentucky gained infamy for their underhanded and illicit methods for acquiring surface land and mineral rights. They were also known for engineering undervalued assessments on their properties so as to minimize their property taxes. Any notion that those practices ended with the implementation of the Coal Severance Tax or the collapse of the coal industry in eastern Kentucky (which is in itself, a misinformed idea) blinds us to the systemic and banal means by which companies continue to sever families from claiming their place and interest in the mountains. I look forward to continuing this research and encourage anyone who has any experience with or interest in Kentucky’s property tax system to reach out and collaborate with me.
Contact me:
Kevin Slovinsky
(619)964-0840