
The Supreme Court’s recent decision highlights an unconstitutional practice of property tax foreclosures in Michigan and beyond, impacting homeowners’ rights to their equity.
At a Glance
- The Supreme Court’s decision protects property owners’ equity after tax debt seizures.
- Unpaid property taxes can lead to foreclosure and seizures far exceeding tax debts.
- Legislative changes are anticipated following the Court’s ruling.
- Several states still allow government retention of excess equity from foreclosures.
Impact of Supreme Court Decision
The U.S. Supreme Court unanimously ruled in the Tyler v. Hennepin County case that seizing property for unpaid taxes and keeping surplus equity violates the Fifth Amendment’s Takings Clause. This decision mandates property owners be reimbursed for any equity remaining after tax debts are resolved. The case spotlighted Hennepin County seizing Geraldine Tyler’s condo, retaining $25,000 after settling her $15,000 tax liability.
The ruling affects nearly a dozen states with similar statutes that allow surplus equity retention by local governments. This extends beyond Minnesota, underlining national implications and pressing states to revise laws to ensure homeowners’ rights are upheld and align with constitutional mandates.
Two years ago, I interviewed a woman whose home was seized over unpaid taxes.
But her house was worth $286K MORE than what she owed.
The Supreme Court now says that's unconstitutional.
Yet she still hasn’t gotten her money back: pic.twitter.com/yKpNK76VTr
— John Stossel (@JohnStossel) October 1, 2024
High-Profile Cases in Michigan
In Michigan, cases like Tawanda Hall and Uri Rafaeli have unveiled the exploitation of loopholes in property tax foreclosure laws. These cases raised awareness about how counties distribute seized properties to entities possibly connected to officials, highlighting the complex legal battles now underway. Such practices attracted scrutiny on the constitutionality of these tax foreclosures, cementing the necessity for judicial intervention on a broader scale.
Despite advances, the path to resolution remains mired in challenges, with stakeholders like the Pacific Legal Foundation’s End Home Equity Theft project aiding in tracking and advocating for just legislation and practices across affected states.
The Supreme Court unanimously ruled it is unconstitutional for governments to keep more money from a property seizure sale than it needs to satisfy unpaid property taxes. https://t.co/KRnP4csOEs
— Breitbart News (@BreitbartNews) May 26, 2023
Future Implications and Legislative Action
The Supreme Court’s decision emphasizes that surplus equity constitutes a property interest, heavily protected within the Fifth Amendment. Legislative changes are expected to follow, influencing how states adopt new frameworks to treat surplus equity, address homeownership rights, and preclude unconstitutional excesses. Groups like AARP, ACLU, and the Cato Institute underscore this urgent need, with engagement from lenders, developers, and property owners to support this transformation.
Moreover, the ruling suggests attention to private investors involved in tax collection, now at risk of liability for violations. It stresses homeowners’ constitutional rights over surplus equity and anticipates significant legal and legislative actions in reassessing tax foreclosure processes nationally.
Sources:
- Supreme Court Decision in Landmark Foreclosure Case
- U.S. Supreme Court Limits Municipalities from Retaining Excess Value in Tax Foreclosures
- Supreme Court takes on what critics call predatory tax foreclosure practice