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3D illustration of two rubber stamps with the words penalties and interest over white background. Unpaid income tax concept.
Geraldine Tyler, 93, owed $15,000 in taxes, penalties, interest and costs. Hennepin county seized her condo and sold it for $40,000 and kept the excess $25,000. ( image)

U.S. justices to hear Hennepin tax case

Can county keep surplus in seized property sale?

The U.S. Supreme Court agreed Jan. 13 to hear the case of 93-year-old Geraldine Tyler, whose condo was seized by Hennepin County in 2015 for failure to pay her taxes.

Tyler, whose case has been in federal courts since 2019, purchased a one-bedroom condominium in Minneapolis in 1999. She moved into an apartment in 2010, citing increased crime in the neighborhood where the condominium was located. Now paying rent on her apartment, Tyler found herself unable to pay the property tax bills on her condo. She owed $2,300 in taxes, as well as $12,700 in penalties, interest, and costs.

Hennepin County seized Tyler’s condo. It was valued at $93,000, but the government sold it for just $40,000, which Pacific Legal Foundation says is a fairly common practice by governments. While Tyler’s debt was only $15,000, the government kept all $40,000—meaning that they got $25,000 over the amount owed.

Pacific Legal Foundation has represented Tyler free of charge, on a crusade to confront what they have called “home equity theft.” Tyler brought suit to vindicate her property rights, but it was dismissed in federal district court. The 8th U.S. Circuit Court of Appeals affirmed, holding that Minnesota was able to redefine Tyler’s private property as public property and, consequently, that Minnesota could keep the surplus.

At the time of the decision, Christina Martin, senior attorney at Pacific Legal Foundation, commented, “We believe that Hennepin County violated Ms. Tyler’s rights by taking a huge windfall at her expense.”

The foundation vowed to take the case to the U.S. Supreme Court and petitioned the court on Aug. 19, 2022.

In a Nov. 29, 2022, report, the Pacific Legal Foundation details that 12 states and Washington, D.C., allow local governments or private investors to take much more than what is owed from homeowners behind on property taxes. Ten additional states protect home equity in the foreclosure process but have loopholes that allow governments or private entities to seize the homeowner’s equity value.

The report revealed that homeowners have lost more than $777 million in savings on more than 5,600 homes based on their market value, above what they owed in tax debt. The homeowners lost, on average, 86%. On the other hand, government entities collected an estimated $26 million more than that they were owed on 1,300 homes. Private investors collected around $250 million more than what they were owed on about 2,600 homes.

“Home equity theft is robbing thousands of people of their homes and all the equity they’ve built. A system that allows governments and private investors to take more than what is owed creates a perverse incentive to work against the homeowner — not with the homeowner — to get the tax debt paid,” says Angela Erickson, strategic research director at Pacific Legal Foundation.

Daniel Rogan, assistant county administrator for Hennepin County, says that despite being characterized as stripping people of their property, policies and procedures exist in Hennepin County that enable people to avoid forfeiture. Rogan said that the county has an innovative program connecting homeowners with navigators so that they avoid forfeitures.

“For example, in 2019, 84 Hennepin County residents received navigator services; 90% of referred residents in tax delinquency were able to stay their homes, and 75 of the 84 residents referred were current on their taxes the end of 2019,” Rogan said. “Hennepin County averages approximately 90 forfeitures in a year with an average of $1.6 million in canceled taxes, interest, and penalties.”

Forfeitures, overall, result in Hennepin County collecting less revenue than if they received property taxes, Rogan added.

Rogan also reported that the forfeiture legal process takes over three years, during which times owners are notified multiple times about the amount due. Property owners are eligible to enter payment plans, which delays forfeiture so long as the payments are made when due. Even in the event of forfeiture, property owners have at least six months to repurchase the property by paying the back taxes, interest, and fees.

“These procedures required by law give the taxpayer every chance to pay and makes the taxpayer clearly aware of the consequences of not paying the taxes before confiscation of the real property,” Rogan said.

Myron Orfield, professor at University of Minnesota Law School, said that the “fact pattern looks unfair to the aged homeowner” but that groups interested in promoting individual liberty and limited government “see this case and this fact pattern as important for strengthening/expanding property rights.” While he was uncertain about what the court would ultimately decide, he said, “It will be interesting how far they take the case in terms of the law and what sort of equity they require.”

In a statement to Minnesota Lawyer about the importance of the U.S. Supreme Court agreeing to hear Tyler’s case, Martin said, “Ms. Tyler’s case could end legalized home equity theft across the United States. This would better protect everyone from abuse by the government and it would especially help the most vulnerable among us, including the elderly and individuals suffering with serious medical conditions.”

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