A federal judge has approved a two-year pause of the lawsuit challenging Baltimore’s tax sale system, after the city agreed to make changes to the process in 2026 and 2027 that could become its long-term approach.

The city has agreed to institute payment plans for people who fall behind on their taxes and water bills and to change the bidding process so that those whose properties are sold can recoup more money, according to court documents.

The revisions could fundamentally alter how Baltimore collects its debts.

“For too long, Baltimore residents have lost their homes over small tax bills and received far less than the value of those homes,” said Vicki Schultz, executive director at Maryland Legal Aid, the state’s largest provider of free civil legal services, at a Monday morning press conference.

She commended city government officials for making a fair agreement that is “accountable and grounded in the real value of people’s homes.”

The Edmondson Community Organization, a neighborhood group in West Baltimore, filed the lawsuit in 2024 in Baltimore’s U.S. District Court. The group alleged the tax sale system systematically stripped low-income people of their generational wealth and violated the Constitution.

Former Northwest Baltimore resident Bonita Anderson, who fell behind on taxes after battling COVID-19 and cancer, later joined the lawsuit after losing her house at a tax sale in 2024.

U.S. District Judge Brendan A. Hurson on Jan. 30 signed an order putting the case on hold.

The agreement came as Baltimore Mayor Brandon Scott’s office rolled out a series of steps meant to lower city residents’ property tax burden. Scott, flanked by a majority of the City Council at the news conference, acknowledged the harms that tax sale has caused over the years.

“These payment plans and this broader tax relief strategy add up to real impact for homeowners here in Baltimore,” he said, “and will help those who want to be become homeowners achieve that dream in Baltimore.”

Baltimore’s tax sale system has long been criticized for its unfair treatment of low-income homeowners. A 2023 Banner investigation found that about 41,000 properties had passed through the tax sale system since 2016, mostly in predominantly Black neighborhoods.

Proponents of the tax sale system argue that it’s an efficient tool for the city to seize control of derelict properties and receive much-needed revenue.

Housing advocates and social justice groups counter that the process needs to be reformed, and that it allows some homeowners to slip through the cracks — sometimes through no fault of their own. People sometimes lose their properties over relatively small amounts of unpaid taxes or mistakes beyond their control.

Under the city’s agreement with Anderson and the Edmondson Community Organization, both will receive compensation. The neighborhood group will also get a new building to serve as its community center.

The Edmondson Community Organization was incorporated in 1993 to serve Midtown-Edmondson, which the lawsuit characterized as one of the city’s most disinvested neighborhoods. The group provided back-to-school supplies, put on Thanksgiving dinners, held Christmas toy drives and offered job training and arts programs to people in the community.

Baltimore gifted the nonprofit a two-story brick building at 2114 Edmondson Ave. in 1995 after federal law enforcement seized it from convicted drug trafficker Melvin “Little Melvin” Williams. The group then turned the space into its community center.

Eventually, the lawsuit states, the group “effectively became leaderless.” The building accrued $2,543 in outstanding property taxes.

In 2018, Tempest, an investment company based in Los Angeles, bought the lien at a tax sale for $5,115 — which entitled the community organization to $2,572.

That’s because under the current system, property owners who lose their homes at a tax sale are only entitled to the difference between the amount of the lien and the winning bid.

Under the new methodology, people whose property is sold would receive the difference between the winning bid and the assessed value of the property — which could mean thousands of dollars more.

Joe Richardson became president of the Edmondson Community Organization in 2022 and raised $65,000 to buy back the property.

But Tempest refused the offer, the lawsuit states, and sold the building at auction to Crown Quality Concept, a company based in Baltimore County, for $139,500.

Anderson, the Northwest Baltimore homeowner, had about $5,400 worth of liens when a Stamford, Connecticut-based investment group, East Coast Tax Sale Auction, bid on her debt. The liens sold for $69,500 in 2020, making her eligible for $64,100 once the company foreclosed.

She had bought her home for $100,000 in 2009, and its taxable value had risen to more than $210,000 by the time she moved out in 2024. Anderson, who went to live with her daughter in Randallstown, said at the time that the ordeal left her “broken.”

In addition to Maryland Legal Aid, Gupta Wessler, a law firm in Washington, D.C., provided representation in the lawsuit.

Others who represent clients facing issues related to tax sales called the agreement an important first step that must be coupled with other changes. Those include faster payouts to people who lose their homes to tax-sale foreclosure.

“We must support our homeowner neighbors to keep our communities stable,” said Allison Harris, director of the Home Preservation Project at the Pro Bono Resource Center of Maryland. “The tax sale system as it currently exists must be dismantled.”