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In 2015, Hennepin County seized Geraldine Tyler’s Minneapolis condo “over about $2,300 of unpaid property taxes, plus $12,700 in penalties, interest and fees.” The county sold the condo for $40,000 and pocketed the $25,000 difference.
Dave Orrick reports for the Star Tribune:
Under Minnesota law, any extra money from the sale of seized property can be kept by the government — divvied up among various government entities, including the local county, city and school district.
Tyler and her attorneys have argued that the government keeping all the revenue is tantamount to the theft of her home equity and violates constitutional protections against uncompensated takings and excessive fines.
Hennepin County has argued — and several courts have agreed — that it doesn’t violate the Constitution because states have the ability to define property rights and Minnesota law essentially says if you don’t pay your taxes, you don’t have any equity.
Moreover, the county argues, what it’s doing is reasonable.
“When a property owner fails to pay taxes and does not avail herself of the numerous ways to remedy the deficiency — including selling the property, using the sales proceeds to pay the tax and keeping any surplus — the state’s retention of the surplus is not an unconstitutional taking nor is it an excessive fine,” said Dan Rogan, assistant county administrator for resident services, in an email Monday.
It will probably not surprise you to learn that Minnesota is an outlier here:
According to a study by the [Pacific Legal Foundation], Minnesota is among 12 states that allow what Pacific has dubbed home equity theft. Twenty-nine states have banned the practice, and the remaining states, including Wisconsin, allow it only in special circumstances, according to the study.
In all but those 12 states, Tyler would have been eligible to receive whatever money was left over from the property sale after her tax debt was paid, said Christina Martin, senior attorney for Pacific.
Christina Martin of the PLF wrote for the Star Tribune recently:
From 2014 through 2021, local governments in Minnesota seized and sold at least 1,350 Minnesota homes. The lost savings amounted to an average of $155,000 per home, or 90% of the home’s value. Minnesota is one of 12 states, plus the District of Columbia, still allowing these abusive and unconstitutional “tax and take” seizures.
In most states, tax foreclosures are treated just like other debts. If you fail to pay your property taxes, the government (or partnering investors) can seize and sell your property to satisfy the debt. But once your debts are paid, the remaining proceeds must be returned to you, the original owner.
But that’s not how it works in Minnesota. Here, the county auditor forecloses on delinquent properties after three years, taking absolute title for the state. The government then decides whether to keep or sell the property and disburses all profits from any sale to government entities. The original owners are left with nothing, regardless of how much equity they might have built up in the property over the years.
Unsurprisingly, the victims of these seizures are often vulnerable people like Geraldine Tyler — seniors on a fixed income. Other common victims are people experiencing job loss, health difficulties, mental health challenges or cognitive decline.
Ms. Tyler is in her 90s and is now in an assisted living facility.
The question of whether or not the county’s actions were legal will now be decided by the Supreme Court. We can ask, though, whether the county’s actions are right in some moral and ethical sense.
I don’t think they are. The county charges certain fees and levies certain taxes in return for the provision of certain services. If you do not pay for the services provided, the county is justified in seeking redress, as is any other service provider. But, like any other service provider, it is only justified in seeking to recover the fees charged for services rendered, not in helping itself to piles of your cash over and above that.
The current situation does not seem right to me. I hope Ms. Tyler is successful.
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