U.S. Supreme Court Rules Against Seizing Homes for Unpaid Property Taxes

Supreme Court Declares Seizure of Homes for Unpaid Property Taxes Unconstitutional

In a landmark ruling, the U.S. Supreme Court has declared the practice of state and local governments seizing and selling homes of individuals with unpaid property taxes, and keeping the surplus funds, to be unconstitutional. The unanimous decision, handed down on Thursday, marked a victory for 94-year-old Geraldine Tyler, who had taken on tax authorities in Minnesota. The court found that Hennepin County, which includes Minnesota’s largest city, Minneapolis, had violated Tyler’s rights under the Fifth Amendment of the U.S. Constitution.

The Supreme Court justices voted 9-0 in favor of overturning a lower court’s decision to dismiss Tyler’s proposed class action lawsuit. The court agreed with Tyler’s argument that the county’s actions violated the “Takings Clause” of the Fifth Amendment, which prohibits the uncompensated taking of private property by the government for public use.

Chief Justice Roberts: Taxpayers Should Not Be Forced to Contribute More Than Owed

Geraldine Tyler had owed approximately $15,000 in property taxes, including interest and fees. The county proceeded to foreclose on her home and auctioned it off for $40,000 in 2016, keeping the excess funds for its own use. Chief Justice John Roberts, writing for the court, emphasized that a taxpayer who loses their $40,000 house to fulfill a $15,000 tax debt has made a disproportionately large contribution to the public fisc.

The legal dispute centered around Minnesota’s tax regime, which allows the state to claim “absolute title” of a property if the owner fails to pay property taxes for five years. Counties have the authority to retain tax-delinquent properties for public purposes or sell them to other government entities or private buyers. After covering expenses, any remaining proceeds are allocated to the local school district, city, and county, with no refund provided to the former owner.

Property Rights Victory: Decision Sets Precedent Against Home Equity Theft

Reacting to the ruling, Christina Martin, an attorney with the conservative legal group Pacific Legal Foundation, which represented Tyler, hailed it as a significant victory for property rights in the United States. Tyler’s lawyers pointed out that 13 other states have similar policies that allow government or private investors to benefit from collecting delinquent property taxes.

Geraldine Tyler, who had moved out of her condominium in 2010, argued that retaining the excess value of her home beyond the tax debt amounted to a “$25,000 windfall for the public” at her expense. The county contended that tax forfeitures do not generate a surplus and defended the practice as a reasonable condition of property ownership.

The 8th U.S. Circuit Court of Appeals had previously upheld the dismissal of Tyler’s case, but the Supreme Court’s ruling has now set a precedent. Notably, President Joe Biden’s administration supported Tyler’s claim, asserting that the county’s actions constituted an unconstitutional taking. This decision will likely have far-reaching implications for similar practices across the country, strengthening property rights and protecting individuals from unjust home equity theft.