Tue, Jan 17, 2023 12:21 PM
By Scott McClallen, The Center Square
The U.S. Supreme Court announced that it will hear a 94-year-old woman’s case challenging the constitutionality of Minnesota laws that allow local governments to take the entire value of a home as payment for smaller property tax debts.
Geraldine Tyler moved out of her Minneapolis condo in 2010 because of rising crime but couldn’t pay both her condo’s property taxes and rent on her new apartment. Her initial $2,300 debt ballooned to $15,000, once penalties, interest, and fees were added.
In 2015, Hennepin County sold Tyler’s condo for $40,000 to settle the $15,000 tax debt but also pocketed Tyler’s $25,000 in equity. The woman sued Hennepin County after it sold Tyler’s home for $40,000 to settle a $15,000 tax debt.
The first court dismissed the lawsuit, saying there’s no way for Tyler to prevail because the action was legal under current state law. Tyler appealed to the 8th Circuit Court of Appeals.
Tyler's case alleges that the county violated the federal and state takings clause, excessive fines clause, and substantive due process clause by taking more than it was owed.
Multiple state courts have taken up similar cases. In 2020, the Michigan Supreme Court ruled unanimously that counties can’t additionally profit from tax-foreclosed homes without justly compensating the property owner. Oakland County had sold a man’s home over an initial tax debt of $8.41, which augmented to $285.81 after interest, penalties and fees.
Oakland County sold the property for $24,500 – more than $35,000 less than Uri Rafaeli paid for it – and then pocketed $24,214.
The nonprofit public interest law firm Pacific Legal Foundation is representing Tyler. PLF says that between 2014 and 2020, more than a thousand Minnesota families lost their homes and all their home equity for tax debts that averaged 8% of their homes’ value.
Ten other states allow what PLF calls "home equity theft". The nation's top court could resolve this issue when it rules on the matter.