Indiana law leaves deceased people owning homes

Houses around Evansville sit vacant and deteriorating year after year. Their owners don't pay taxes or care for the property because they are dead.

It seems absurd; the dead can't own property. Yet, title searches of vacant houses periodically name deceased people as the legal owner of record. And every year, local government sends them tax bills and legal notices. They are cited and fined when they don't cut their grass, and when the abandoned home inevitably start falling apart. When they fail to pay the fines, the city places a lien on the home.

It happens more often than you'd think.

Last year, at least 33 of the houses that went up for tax sale had dead owners. And the Building Commission deals with a dozen or more houses with deceased owners every year, said Ron Beane, the deputy Evansville-Vanderburgh County building commissioner.

That's because they often create problems. Twice this year, massive fires erupted at vacant homes with deceased owners. In April, 747 E. Bellemeade Ave. nearly burned to the ground and later was demolished in an emergency raze paid for by the city. The now vacant lot is still owned by Helen Barnhill and her son Charles C. Carrethers, who died years ago.

In early August a fire at 1607 S. Bedford Ave. injured a firefighter and spread to a nearby home. Owner Carol Ann Rozanski died in 2011.

"That place used to be beautiful," said George Garst, motioning to Rozanski's burned out house last week. He stood on the front porch of his neatly kept home, which sits directly across the street.

"Now," he paused, "you get tired of looking at it. It's an eyesore."

Garst has watched the home's steady decline over the last three years. At first it was just the unkept weeds in the front yard that were a nuisance. But as the house started to deteriorate, it attracted homeless people. Squatters and other criminals came and went unchecked. The number of car-thefts in the neighborhood seemed to rise, and Garst and other neighbors worried their homes would be targeted next.

Then 1607 caught fire.

"I wouldn't mind buying it just to demolish it," Garst said.

But you can't buy property from a dead person.

Houses like 1607 S. Bedford and 747 Bellemeade are caught in a kind of legal limbo, said Brian Carroll, a local probate and estate planning attorney. He also is the former local building commission hearing officer.

When a homeowner dies, there are a set of laws in place for who can inherit the property.

If the deceased has a will or power of attorney in place, the process is usually smoother. But even without a will, relatives or creditors can initiate what's called an "estate proceeding." Ultimately, that proceeding seeks to name a representative who could sell property, pay bills and collect assets. And usually someone will step forward, initiate an estate proceeding and deal with the house.

But not always.

Legally, heirs are not required to take property. And when no relative takes the house, it stays in the deceased owners name.

"This usually happens when (the owners) don't have a will or the house isn't worth enough for anyone to worry about," Beane said. In that case "all our ordinances are written that the owner of record is the responsible party."

So, the county continues to tax and fine the deceased until one of two things happens: The home deteriorates to the point that it becomes a public safety issue and the Building Commission demolishes the structure, or the taxes go unpaid long enough that the county auctions the home at "tax sale."

In some states, this is where the process ends. The vacant home is sold to a new owner at the tax sale.

It's not that simple in Indiana.

The purpose of a county tax sale in Indiana is for the county to recoup the unpaid taxes while giving the owners every opportunity to keep their homes. So, after a home is bid on at tax sale, even the deceased owners have 12 months to repay the taxes, plus interest and keep the house. There is no exception.

At the end of the 12 month "redemption period" the bidder can petition the court for the deed to the home. But — this part gets even more complicated — the bidder is not required to take the property.

Many of the bidders in Evansville and around the state are investment companies that bid blindly on homes on the gamble that the owners will repay the taxes plus interest, which was 10 percent last year. These companies rarely take the deeds to the properties.

So, at least two and a half years after the owner's death, the house is usually still in her name. And — with the taxes paid up by the tax sale — it will be at least another six months before the property can be put up for tax sale again.

That is likely what will happen with 747 Bellemeade and 1607 S. Bedford Ave. They were "sold" at tax sale in 2013 to the same bidder: Alterna Capital Management. According to its website, the Florida-based company specializes in acquiring and managing "municipal tax lien certificates and commercial real estate debt." Alterna bid on 57 tax sale properties in Evansville last year.

Even if the company intended to take the properties at the end of the redemption period, the fires make them a much less attractive investment. Most likely, both homes will stay in the deceased owners names. The county will continue to send them tax bills and levee fines until they become delinquent enough to again be placed again on the tax sale list.

"What you're describing is a broken legal system," said Frank Alexander, a law professor and the Senior Advisor for the Center for Community Progress, an organization that helps communities reduce vacancy and blight.

"The worst cases of tax foreclosure systems take place at the bottom of the market," Frank said. "It encourages companies to make low investments with high possible payoffs, and then walking away from it when it doesn't pay off. What you're describing to me is a broken legal system that encourages speculation at the bottom of the market."

This system has to be fixed in order for local governments to effectively deal with vacant, abandoned, blighted, and deteriorating houses, whether the owners are dead or alive.

There are several ways to do this, Frank said. One method, utilized by several states, is to give local governments the authority to sell vacant, abandoned homes to new owners immediately once taxes are delinquent.

Last year, Indiana lawmakers passed a law like that. It gave counties the authority to eliminate the 12 month "redemption period" for houses that have been deemed vacant and abandoned. But a technicality written into the law made it illegal for Evansville to implement.

Lawmakers plan to rewrite the law to remove this technicality next year.

In the meantime, Vanderburgh County will host another tax sale in September, placing hundreds of homes up for bid.

"When it gets bad enough, it gets on our radar," Beane said. "We end up with it once it becomes painfully apparent that nobody else wants it."