A tax foreclosure practice that has deprived dozens of New Bedford property owners of their home equity was declared unconstitutional by the U.S. Supreme Court Thursday.
The court ruled in a case brought by Geraldine Tyler, a 94-year-old Minnesota woman who lost her condo over $15,000 in unpaid property taxes. Hennepin County seized the condo and sold it for $40,000, but the county kept all of the proceeds. Tyler’s lawyers argued that home equity is private property, so she should have received the money left over from the sale after her debt was paid.
All nine justices sided with Tyler. Justice John Roberts wrote in the court’s unanimous opinion that Hennepin County violated the Fifth Amendment, which says the government can’t take private property without paying the property owner what it’s worth.
“The County had the power to sell Tyler’s home to recover the unpaid property taxes,” Roberts wrote. “But it could not use the toehold of the tax debt to confiscate more property than was due.”
The ruling is expected to change how tax foreclosures are done in a handful of states with similar laws — including Massachusetts, where tax collectors can’t return excess equity after the sale. Earlier this year, a New Bedford Light investigation found that dozens of New Bedford property owners lost their houses, and all the remaining equity in them, over tax debts that were only a fraction of the property’s value.
The court ruled that the government can still sell properties to recoup unpaid taxes, but it has to return the excess equity to the homeowner after the sale to comply with the Fifth Amendment. Most states already follow this procedure in tax foreclosures.
Hennepin County had argued that governments can set reasonable conditions on land ownership, like staying current on taxes. The Fifth Amendment didn’t apply in the case, the county argued, because Tyler wasn’t forced to give up her condo — if she had stayed up on her taxes, she wouldn’t have broken the county’s conditions, and she could have kept the property. The county compared it to a case of abandonment.
But Roberts wrote in his opinion that the county failed to show how simply not paying property taxes constitutes abandonment. He also cited centuries of legal precedent establishing that the government can’t take more in taxes than it’s owed, including situations where the government must seize and sell property.
Tyler’s lawyers had also argued that the county imposed an excessive fine on her late taxes by keeping all the remaining equity, but the court decided not to rule on that claim because Tyler had already won the case under the Fifth Amendment. Still, Justice Neil Gorsuch, joined by Justice Ketanji Brown Jackson, wrote a concurring opinion that critiqued the lower courts’ rulings against Tyler’s excessive fines claim.
Before Thursday’s ruling, some Massachusetts lawmakers had already been working to change the law around tax foreclosures. In 2019, State Sen. Mark Montigny introduced a bill that would give property owners the right to get their remaining equity back in tax foreclosure sales. State Reps Jeffrey Roy and Tommy Vitolo did the same in 2021. But session after session, the bills never passed.
Montigny applauded the ruling in a statement on Thursday and said he hopes it will help push his bill through the Legislature so that the state can comply with the court’s interpretation of the Fifth Amendment.
“Homeowners must be provided with enhanced protections so that their residences are not stolen under the guise of a bureaucratic process, and that they have every opportunity to settle their debt,” Montigny stated. “Pushing out senior citizens, people with disabilities, and those facing tremendous personal challenges is atrocious.”
Montigny said local officials should provide restitution to homeowners who lost equity to tax foreclosures, adding that “those officials are not worthy to serve the public.”
Roy and Vitolo also issued a statement in support of the ruling.
“We remain committed to ridding Massachusetts law of this unfair, and now unconstitutional, practice,” the joint statement said.
The City of New Bedford used to sell its tax debts (called “liens”) to a private tax collector between 2016 and 2020, but it hasn’t sold the liens or filed any new tax foreclosure cases since then. As part of its comprehensive housing plan unveiled in March, the city announced that it planned to “continue to refrain from the sale of tax liens.” But when asked whether the announcement constituted a long-term policy change, Mayor Jon Mitchell did not rule out the possibility of a tax lien sale in the more distant future.
Tyler’s lawyers from the Pacific Legal Foundation, a California-based libertarian public interest law firm, had also represented homeowners in New Bedford and Dartmouth who went through tax foreclosures, though neither of the cases reached a judge who could rule on the constitutionality of Massachusetts law.
“Today’s decision is a major victory for property rights in the United States,” said Pacific Legal Foundation attorney Christina Martin in a press release. “The Court’s ruling makes clear that home equity theft is not only unjust, but unconstitutional.”
Email Grace Ferguson at email@example.com.
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