As public officials push his rental properties into foreclosure, a landlord with nearly $1 million in back taxes will find no sanctuary in bankruptcy court.
Judge Alan M. Koschik of the Northern District of Ohio tossed out Gary L. Thomas' request for bankruptcy protection Monday. The landlord lives in Wadsworth but rents almost exclusively to lower-income tenants in Akron. Several of his paying tenants complain that the homes they rent are falling apart, with them inside.
Since last summer, public officials have gone after 22 companies Thomas uses to manage or hold more than 100 properties. He tried to save 27 of the properties from a sheriff’s sale in October by pushing four of his companies into bankruptcy. Together, there's $461,374 in back taxes on those 27 properties — about a third of all properties in the tax foreclosure case.
In an initial hearing on the matter, an attorney for the U.S. Trustee Program, which manages property in bankruptcy, had asked Judge Koschik to dismiss the case because several properties lacked liability insurance, including a few with occupants. Koschik gave Thomas two weeks, but seven properties remained uninsured on Monday.
In bankruptcy, Thomas could negotiate with debt collectors and avoid public auctions. Now, the Summit County Fiscal Office and the Land Bank can continue their joint tax foreclosure operation, the first ever in Ohio to target a single landlord who records show often sells or transfers properties amid missed tax bills and mounting housing code violations.
“We are pleased with the U.S. bankruptcy court decision," said Summit County Fiscal Officer Kristen Scalise, who hopes to have the 27 properties back at a sheriff’s sale by April.
With help from the Summit County Prosecutor’s Office, the land bank and fiscal office launched their concerted tax collection effort 18 months ago, eventually foreclosing on 74 properties. Thomas sold or redeemed the taxes on a few. He's been at two sheriff's sales, using his tax-delinquent companies to buy back properties worth keeping. He outbid the land bank on a now shuttered bar where two men died in separate shootings last year. But Thomas failed to pay what he bid, so he lost his deposit. Citing the failure to pay, county prosecutors got a judge to bar Thomas from bidding at future auctions.
In federal court Monday, Judge Koschik and Thomas’ bankruptcy attorney, Morris H. Laatsch, confused Thomas with his companies, a legal distinction that prevents creditors like banks and debt collectors like the county from going after Thomas personally. Laatsch told the judge that Thomas, who's used his brief time in bankruptcy court to find buyers for some of the 27 properties, would get insurance by the end of the day on properties with pending sales. He needed permission in bankruptcy to make the sales. Now that the case is dismissed, he can move on the sales with no requirement that the proceeds cover any back taxes.
Laatsch also pitched the judge a 10-year repayment plan using about $2,250 of the $9,000 in rent his four companies collect each month to pay off the back taxes.
The judge criticized the plan as “wishful thinking," citing “no indication” that would excuse Thomas for failing to pay his taxes all these years. "That seems to suggest a bit of abuse,” Koschik said.
Thomas leaned over and advised his attorney to argue that the county, if allowed to sell his properties at auction, would be creating more blight. After the hearing, Thomas bet a reporter that 10 or 15 of the contested properties, some of which are already vacant, would be empty and again tax delinquent in a year. "Shortly after, they'll be disguised as vacant land," he said.
Koschik rejected Thomas' claim that the land bank would not be a better steward of the property. With a documented history of neglecting taxes and repairs, the judge blasted Thomas for shirking his responsibilities as a citizen and landowner.
"The debtor still seems reluctant to live up to his obligations and only begrudgingly interested in purchasing insurance when he's forced to do so," Koschik said. "Under these circumstances, there’s no reason to grant safe harbor in Chapter 11 [bankruptcy] in order to delay the inevitable from happening. … There are taxes that need to be paid. There are social issues and land ownership issues from a public policy perspective that … the city and the county have jurisdiction over."
Reach Doug Livingston at 330-996-3792 or email@example.com.