The City of Colonial Heights, Virginia v. Alpene Land, LLC (Virginia Appeals Court Limits Retroactive Tax Penalties on Delinquent Commercial Land)

Full write-up

The City of Colonial Heights brought three judicial tax-sale actions under Virginia Code Section 58.1-3965 against commercial landowners Alpene Land, LLC and Barker Investment Corporation, seeking the sale of several parcels over more than $65,000 in real estate taxes delinquent across nine tax years, 2016 through 2024. After the owners sought to redeem the properties by paying into court the amount they argued was actually due, a dispute arose over whether the City's existing penalty-and-interest ordinance, City Code Section 258-13, was valid. The circuit court held the ordinance 'enacts nothing' and that the City therefore had no authority to collect penalties or interest at all.

While that ruling was pending final order, the City passed Ordinance No. 24-13, setting a flat 10 percent penalty and 10 percent annual interest rate and declaring the new rate retroactive to any real estate taxes due on or after May 15, 1992. The circuit court held the new ordinance could not be applied retroactively, reasoning under Virginia's Dillon Rule that the General Assembly had not delegated the City authority to impose penalties and interest on already-delinquent taxes after the fact.

The Court of Appeals reversed in part and affirmed in part. It held the circuit court was wrong to conclude the City could collect no interest or penalties at all: even with the local ordinance defective, Virginia Code Sections 58.1-3915 and 58.1-3918 set statewide default penalty and interest rates that apply to delinquent real estate taxes regardless of whether a locality's own ordinance validly sets its own rate. But the court agreed with the circuit court that the City's August 2024 ordinance could not be applied retroactively to taxes already delinquent before its passage, affirming that portion of the ruling.

For commercial owners litigating a tax-sale or redemption dispute over a technical defect in a local penalty ordinance, the case means a locality's drafting error will not eliminate interest and penalties outright, since the state's own default rate fills the gap, but it also caps how far a locality can reach backward once litigation exposes that error: a newly enacted local ordinance passed in response cannot retroactively increase what is owed on years already delinquent before it took effect.

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