Portsmouth board says city should auction off three seized downtown properties

PORTSMOUTH — The Planning Board believes the city should sell to the highest bidder three downtown properties it took by tax deed.

The board voted unanimously to recommend the City Council hold a public auction, after discussing the issue and hearing from Deputy City Attorney Trevor McCourt at a recent meeting.

The city seized the three properties in downtown Portsmouth – where property values have soared over the past decade – after the owner failed to pay property taxes for at least three years.

The properties are 508 Richards Ave., 150 Bartlett St. and 323 Islington St.

The board voted on its recommendation after the City Council recently referred the matter to them.

Sale of properties for non-payment of taxes highly unusual in Portsmouth

Board members heard too from City Manager Karen Conard, who serves on the Planning Board.

She acknowledged the “unprecedented nature of never having in recent memory been in the position to take residential properties.”

“It’s not our core competency to be residential landlords, given some of the liability concerns, the longer we continue to own or manage residential properties,” Conard said.

She “wouldn’t be comfortable doing any option other” than recommending to the council that the properties be auctioned off, Conard said.

“The immediate goal would be really to get out of the chain of liability … with the properties,” Conard said.

City eager to get properties off its books

McCourt told the board that before the property owners stopped paying taxes, each property was owned “by different partnership entities.”

They have not been able to reach the former owners, McCourt said previously.

The properties have now been deeded to the city, he said.

“These properties are on our books, they’re on our insurance,” McCourt explained. “Things that go wrong will be our responsibility to fix. If we’re going to auction the properties off, I’d definitely recommend that be done as soon as possible.”

The City Council will ultimately decide how to dispose of the properties at an upcoming meeting at a date not yet determined.

Properties are an 'ongoing liability'

Before the board voted on its recommendation, Chairman Rick Chellman said he shared Conard’s concerns.

He pointed to the “ongoing liability” the city now faces as the owner and landlord of the properties.

If someone got hurt, he said, the city could end up “being liable.”

But if the city holds a public auction of the properties, then the sale is open for all to see, Chellman said, and no one can suggest the properties were sold for "less than market value."

Board Vice Chair Greg Mahanna, who made the motion to dispose of the properties at public auction, said “this smells like the mortgage meltdown.”

“The banks were horrible landlords, they all got sued, nothing good ever came of it,” he said. “The faster we get rid of them, the less liability, move the ball along.”

Appraised values of properties total $1.72 million

McCourt told the board “there is a significant amount of equity in each of the properties.”

The city’s appraisal values of the properties are $647,000 for 508 Richards Ave, $576,000 for 323 Islington St., and $497,000 for 150 Bartlett St., according to city records.

If the properties are sold at public auction, the city can recoup the unpaid taxes, a “statutory penalty” of 10 percent of the assessed value, interest and other costs related to their upkeep and management, McCourt said.

“Anything above that must be returned …to the prior owners,” he said.

The actual takings of the properties by tax deed “is a very unusual thing here in the city of Portsmouth,” McCourt said.

“I don’t believe it’s been done by the city within living memory,” he added.

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Two of the buildings have tenants

In terms of the properties, there are two housing units in the 508 Richards Ave. building, McCourt said.

The city extended the leases of people living in the buildings when they took the properties by tax deed, he said.

The apartments at the Richards Avenue building are rented to Seacoast Repertory Theatre actors, McCourt said.

They house actors “that they bring in for long-term productions,” he said.

Most recently, there were two commercial businesses in the 323 Islington St. building, McCourt said, but it’s unoccupied now.

He believes the building could be bought for residential uses.

But he told the board it needs “some more significant renovations.”

The property at 150 Bartlett St. is a five-unit, multi-family building with only one of the apartments rented, McCourt said.

The city hired a property management company “to manage all three properties,” he said, but that cost “will be billed against the estate.”

A second option could be for the city to obtain “an appraisal of the fair market value of the parcels and to offer the difference between what the city is owed and the appraised value to the previous property owners,” McCourt said.

“If accepted, city staff would then negotiate an appropriate agreement with the previous owners and return to the City Council for an appropriation of funds,” McCourt said.

Another option could involve holding an auction of the properties but allowing the city to bid up to a “pre-specified limit,” McCourt said.

This article originally appeared on Portsmouth Herald: Portsmouth, NH moves to auction off three seized downtown properties