Long-litigated property tax tussle results in $109M settlement fund

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The efforts of five class action lawyers and the approval of Ramsey County Judge Leonardo Castro came to fruition just in time for Christmas for thousands of property owners and their heirs.

It is the result of a long-litigated case, Tyler v. Hennepin County, in which the 94-year-old plaintiff’s condo was seized and sold by the county for $40,000 over a $15,000 tax debt. The county kept the entire $40,000.

In 2023, the U.S. Supreme Court determined Hennepin County’s action under Minnesota tax-forfeiture statutes was an unconstitutional taking of private property without just compensation.

People previously injured across the state may recover now. Claimants who have lost property to the state for delinquent property taxes, or who are heirs and lien holders of forfeited property, may claim a share of a $109 million fund approved by Castro. Lawyers estimate that the average claim is worth more than $20,000, and that some go to six figures.

Both houses of the Legislature unanimously funded the settlement,

“The final approval of the settlement is great news for Minnesota property owners, their heirs, or anyone who held an interest in property that was lost through tax forfeiture,” said Minneapolis lawyer Vildan Teske. “We can now get money back to class former owners and their families so they can move forward with their lives.”

Lawyers say act now

Minnesotans who lost property or liens for property taxes should access the court-approved settlement website, MNTaxForfeitureSettlement.com or call (833) 522-3374 for information. The deadlines for challenging the settlement (there were none) or opting out of the class have passed. Claimants must submit a Claim Form by June 6, the site warns.

Teske underscored the importance of submitting claims as soon as possible. They can be submitted on the website or by requesting a paper form. Claimants need a Class Member ID to file a claim. A claimant who did not receive notice with a Class Member ID should visit  the registration page on the website.

New Minnesota law

To get to this settlement, the class lawyers litigated for five years, including taking the Tyler case to the  Supreme Court. The 8th U.S. Circuit Court of Appeals had affirmed the county’s motion to dismiss. The county seized Tyler’s condominium for $40,000 for a $15,000 tax debt and retained the excess $25,000. The county argued that, under state law, it was entitled to keep $25,000 because Tyler did not affirmatively disclaim the existence of other encumbrances on the property and raised other defenses. Chief Justice of the United States John Roberts said that Tyler had standing to proceed with her claim and that state law violated the Constitution’s Takings Clause. The court did not address the county’s defenses.

Subsequently, the parties agreed to discuss a global settlement. After extensive informal discovery and many months of email, telephone, video and in-person discussions, they, along with a representative of the Minnesota Legislature, participated in a two-day mediation session presided over by Judge James M. Rosenbaum, retired chief judge for the District of Minnesota.

The laws under which the county kept the entire value of the forfeited property had been on the books for 90 years and had been the longstanding practice in Minnesota, said lead class lawyer Garrett Blanchfield of Minneapolis. Joining Blanchfield and Teske on the team were Charles Watkins, David Guin and Roberta Yard.

But the law has changed since Tyler was decided. Blanchfield said that, going forward, property owners who lose their property will be able to make a claim for the equity in excess of tax debts. Minn. Stat. sec. 282.005, passed in 2024, addresses the initial sale of tax forfeited land.

MINN. STAT 282.005
TAX-FORFEITED LAND; INITIAL SALE

Subd. 6. Claims for surplus proceeds.

(a) If a sale under this section results in a surplus, within 60 days of the sale, the county auditor must notify interested parties, in a manner described in subdivision 7, of the surplus by sending notice of the surplus and a claim form to the interested parties. The commissioner of revenue must prescribe the form and manner of the claim form. The notice must indicate that the sale of the property resulted in a surplus, the amount of the surplus, that parties with an interest in the property are entitled to the surplus amount, and that interested parties have an obligation to submit a claim for the surplus. Interested parties are entitled to make a claim for surplus proceeds under this subdivision if they file a claim within six months from the date the notice is first mailed to the interested parties.

(b) Unless disputed by the county auditor, if a single claim is filed, the county auditor must pay the surplus to the interested party filing the claim. A county must not pay any claimant until after the period of time in which to file a claim has expired.

(c) If there are multiple claims for a given property, the county must divide payments under this subdivision among the claimants according to each claimant’s interest in proportion to the interest of all claimants. If the county auditor disputes a claim, or if there is a dispute as to how to divide the surplus among multiple claimants, the county auditor may deposit the surplus funds in district court and file a petition pursuant to Rule 67 of the Minnesota Rules of Civil Procedure, asking the court to determine claimants’ rights to the funds deposited. The county auditor is entitled to recover the costs it reasonably incurs in commencing and maintaining this action from the amount of funds submitted to the court in the action. If the court determines that no claimant is entitled to the surplus, the surplus must be returned to the county and deposited into the county’s forfeited tax sale fund.

(d) The county and the county auditor are entitled to absolute immunity related to any claim predicated on distribution of surplus if the county auditor distributed proceeds consistent with this subdivision.

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