An out-of-state mortgage lender is challenging the practice by the Lucas County Sheriff's office of including unpaid water and sewer bills in the collection of fees on foreclosed homes.
A lawsuit filed last week by Malco Real State, Inc. of Massapequa, N.Y., in U.S. District Court in Toledo claims Toledo's public utilities department has been unfairly attaching liens on property for water and sewer and garbage collection.
The city of Toledo and the Lucas County Sheriff's Office, which handles the collection of costs on the sales of homes at sheriff's auctions, are named as defendants in the complaint.
The lawsuit also seeks class-action status for other lenders who have been impacted by the practice.
The case stems from the foreclosure of a home on Boalt Street in South Toledo by Malco in 2009. In the foreclosure, the mortgage lender was ordered to pay $1,865 in delinquent water and sewer fees.
Malco said the lien placed on the house by the city were not valid because the department of public utilities had not followed the certification procedures for listing the delinquency on the real estate tax list as required by state law.
"The public utilities department has a particular method by which they could have created a lien if they wanted to but they chose not to do that," said David Freeburg, a Cleveland attorney who represent the mortgage lender. "The costs can be assessed if the department of public utilities goes through the right steps to the liens certified that is owed to the county auditor and the county auditor puts the liens on the tax bills."
City Law Director Adam Loukx said he had read the lawsuit, but would not comment.
John Borrell, an assistant county prosecutor who handles the sheriff's department, could not be reached for comment.
The lawsuit said the county sheriff has been including the unpaid feels utility and trash pickup on property foreclosed in the city since 2009.
According to the lawsuit, there are likely other mortgage lenders may have been subjected to the same costs in liens that were not properly certified and could be eligible for claims in a class-action.
"Our allegations are that we are not the only party with a lien that has suffered this same unfair charge," Mr. Freeburg said.