A nonprofit community association that serves a historically Black neighborhood in West Baltimore filed a lawsuit on Tuesday challenging the city’s tax sale system, alleging that it systematically strips low-income people of their generational wealth and violates the Constitution.

The Edmondson Community Organization filed the case in U.S. District Court in Baltimore and asserts the city designed the system to sell as many tax liens as possible rather than ensure people are compensated for what their properties are actually worth. The nonprofit organization is asking a judge to award monetary damages and order the city to stop its practices, which the group claims are unconstitutional.

The case comes on the heels of a unanimous 2023 ruling from the U.S. Supreme Court that held that the government could not take and sell a house and then keep more money than the original tax debt.

Lee Ogburn, advocacy director for appellate and impact litigation at Maryland Legal Aid, speaks at a news conference outside the Edmondson Community Center in West Baltimore shortly after a lawsuit challenging city tax sales was filed in court on July 2, 2024. (Ulysses Muñoz/The Baltimore Banner)

“We’re not doing this to harm the city. Quite the opposite,” said Lee Ogburn, advocacy director for appellate and impact litigation for Maryland Legal Aid, a private, nonprofit law firm that provides free legal services statewide to low-income people, which filed the lawsuit on behalf of Edmondson Community Organization.

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“The city will benefit from revisiting how it addresses the tax sale issue, both to the benefit of its individual citizens, and to the benefit to the city itself.”

Bryan Doherty, a spokesperson for Mayor Brandon Scott, provided a statement on behalf of the law department: “As this is ongoing litigation, we will reserve comment for the appropriate judicial forum.” But officials have long argued that the tax sale can be an effective tool that encourages people to maintain their properties, as well as a way of recovering lost revenue.

The city can sell outstanding tax liens that are above a certain amount. Investors can bid and buy them. If people fail to “redeem,” or pay off, the debts with fees and interest, lienholders can then initiate foreclosure proceedings and either keep or sell the properties.

At times, investors spend just a few thousand dollars on a home before turning around and selling it for a much higher profit. But they only have to pay the property owner the difference between the winning bid on the tax lien and the amount of the debt.

A 2023 Baltimore Banner investigation into the city’s tax sale system found that some 41,000 properties — most of which are in predominantly Black neighborhoods — have cycled through the system since 2016, resulting in hefty profits for lienholders and excessive headaches for homeowners. This year’s tax sale was held on May 20.

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Often, just a handful of investors account for the majority of lien purchases. The complaint alleges that about 75% of the liens auctioned in 2024 were purchased by one of 10 bidders. The lawsuit also asserts that the revenues collected from the annual tax sale accounted for “less than three thousandths of one percent” of Baltimore’s 2022 fiscal year budget.

The tax sale system has evolved into an inherently political issue: Scott has removed owner-occupied properties from the tax sale list each of his four years in office, and one of his challengers, Thiru Vignarajah, campaigned on a platform of ending the practice altogether before he dropped out of the Democratic primary.

State lawmakers, meanwhile, have made several attempts to reform the process. One effort this past year sought to extend more protections to homeowners across Maryland, but that fizzled out after housing advocates took issue with language in the bill that they argued would have made renters and property heirs more susceptible to losing their properties at tax sale.

Sometimes, purchasers compete for bids, resulting in an auction-style sale of a debt.

That’s what happened to Edmondson Community Organization, which had its community center put on the tax sale list in 2018 for $2,543 in outstanding property taxes, according to the lawsuit. Tempest LLC, a California-based investor, bought the lien for $5,115 — entitling the community group to just $2,572 for a building that ultimately sold for $139,500.

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Edmondson Community Organization was incorporated in 1993 to represent Midtown-Edmondson, which the lawsuit describes as one of the city’s most disinvested neighborhoods. The group provided back-to-school supplies, held Thanksgiving dinners, conducted Christmas toy drives and extended job training and arts programs to members of the community.

Baltimore gave a two-story brick building at 2114 Edmondson Ave. to the community organization in 1995 after federal law enforcement seized it from the notorious drug trafficker, Melvin “Little Melvin” Williams, who used to own it.The nonprofit inherited the building without a mortgage, according to the lawsuit.

But the group fell behind on the property taxes after its leaders stopped being able to run the community organization, the lawsuit asserts.

The president, John Hailey, a Baltimore Police officer, died in 2017. The secretary, Zelda Robinson, moved into a nursing home. And the Rev. Lovell Parham “became significantly involved in other organizations,” the lawsuit alleges, and the group “effectively became leaderless.”

Joe Richardson, President of the Edmondson Community Organization, stands in-front of Edmondson Community Center building, Tuesday, January 10, 2023
Joe Richardson, president of the Edmondson Community Organization, stands in front of the community center it lost in the city’s 2018 tax sale, in this photo from Jan. 10, 2023. (Jessica Gallagher/The Baltimore Banner)

In 2022, Joe Richardson became president of the Edmondson Community Organization.

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Richardson raised $65,000 to buy back the building. But Tempest, the lawsuit claims, refused the offer.

Next, the lawsuit asserts, Tempest sold the building at auction to Crown Quality Concept LLC for $139,500 — a more than 2,600% profit.

Now, the community organization routinely reviews the list of properties up for sale tax in the neighborhood and knocks on doors to alert people and provide them information about potential resources, according to the lawsuit.

“It is vitally important that we hold government actors accountable to their requirements of the Constitution,” said Somil Trivedi, chief legal and advocacy director at Maryland Legal Aid. “So while this might seem like an arcane tax collection issue, it is also a matter of individual constitutional rights. And everybody, including the members of the Edmondson community, is entitled to those rights.”

At a Tuesday morning news conference held shortly after the lawsuit was filed in federal court, Jonathan Sacks, the executive director of the Edmondson Community Organization’s development division, called tax sale a “back door” for speculators to gain control of a community’s assets while offering nothing in return.

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He called on the city to create a new model based on “extreme empathy” for those at risk of displacement — one that centers on community developers, he said, rather than profit-driven investors from out of town.

Jonathan Sacks, executive director of Edmondson Community Organization’s development division, speaks at a news conference outside the Edmondson Community Center in West Baltimore shortly after a lawsuit challenging city tax sales was filed in court on July 2, 2024. (Ulysses Muñoz/The Baltimore Banner)

“Your extractive, tangled-title creating, long-term vacancy spreading, community-destroying tax sale is going to be over with this case,” Sacks said. “Your business model is dead. We are killing it.”

Attorneys from the Washington, D.C.-based Gupta Wessler LLP law firm are also involved in litigating on behalf of Edmondson Community Organization.