Maine and other states are ending home equity theft
In a historic decision in 2023, the U.S. Supreme Court’s ruling in Tyler v. Hennepin County set a national precedent that has fundamentally changed property rights laws across the United States. This ruling, which was driven by the efforts of the Pacific Legal Foundation, declared that the government cannot take more than what they are owed when collecting delinquent property taxes. This decision has also prompted states to make significant reforms to protect the property rights of millions of Americans.
Tyler v. Hennepin County is a classic example of what’s known as home equity theft. Home equity theft occurs when the government seizes a property due to unpaid property taxes and keeps the surplus proceeds from the sale, often leaving the homeowner with nothing even if the property’s value far exceeds the outstanding tax debt.
Tyler v. Hennepin County
In the case, 94-year-old Geraldine Tyler’s home was seized by Hennepin County, Minnesota, over an unpaid 15,000 tax bill. Hennepin County eventually seized her home, sold it for $40,000 and kept the entire amount from the sale, leaving Tyler with nothing. Tyler, who was represented by the Pacific Legal Foundation, took the case to the Supreme Court arguing that this practice was a violation of the Fifth Amendment, which prohibits the government from taking private property without just compensation.
The Supreme Court unanimously agreed and found that Minnesota’s actions violated the Fifth Amendment’s prohibition against the government taking private property without “just compensation.” The Court ruled that the government cannot take more than what it is owed in delinquent property taxes. The equity in a property, the Court declared, is as protected as the property itself. According to Chief Justice Roberts, who wrote the opinion for the high court, “The taxpayer must render unto Caesar what is Caesar’s, but no more.”
Additionally, the Court’s decision showed that Tyler’s contribution to the public treasury was disproportionately greater than her debt. Chief Justice Roberts stated, “A taxpayer who loses her $40,000 house to the state to fulfill a $15,000 tax debt has made a far greater contribution to the public fisc than she owed.”
These statements underlined the Court’s stance that while the government has the right to collect unpaid taxes, it cannot take more than what is owed. The Court’s decision paved the way for Tyler to seek compensation from the state and set a new standard to ensure that homeowners are entitled to any surplus proceeds from the sale of their property after tax debts are settled.
Tyler’s legal team saw the decision as a major victory for property rights. Attorney Christina Martin stated, “This decision affirms that property rights are fundamental and don’t depend solely on state law. The Court’s ruling makes clear that home equity theft is not only unjust, but unconstitutional.”
The ruling also gained support from other legal experts. Thomas Berry, a constitutional lawyer with the CATO Institute, celebrated the decision, saying, “After this decision, states will no longer be able to get away with the pernicious practice of home equity theft.”
State Level Reforms
While the Supreme Court’s decision established an important legal precedent, it did not automatically change state laws. The real impact of this ruling depends on state-level action to align existing laws with the new legal standard. This is where the efforts of five State Policy Network (SPN) affiliates became instrumental.
The Platte Institute in Nebraska, Mountain States Policy Center in Idaho, Cascade Policy Institute in Oregon, Maine Policy Institute in Maine, and Pioneer Institute in Massachusetts led reforms in their respective states. By advocating for legislative changes, these organizations ensured that state laws conformed to the Supreme Court’s ruling, effectively ending the practice of home equity theft in their respective jurisdictions.
The significance of such state-level reforms cannot be overstated. By changing the law, these organizations protected property rights for some of their most vulnerable residents. They ensured that homeowners would no longer lose their entire property value over unpaid taxes. This is an important step in preventing homelessness and financial ruin for many Americans.
Such state level reforms have a far-reaching impact; and the efforts to end home equity theft in these five states has protected the property rights of approximately 3.85 million Americans. The collaborative efforts of these organizations highlight the importance of state-level action in upholding and implementing Supreme Court jurisprudence.
Conclusion
The Supreme Court’s decision in Tyler v. Hennepin County was a great victory for property rights, but it was the subsequent state-level actions that truly brought the decision to life. The state level reforms enacted as a result of the decision ensure that justice and property rights are not just legal concepts, but rather the reality for millions of Americans.
Afua Kwarteng is a graduate student at the University of Maine pursuing a dual MBA and Global Policy degree. She graduated from the University of Ghana with a BA in Political Science and Swahili. She is passionate about state and international policy and is serving as Maine Policy Institute’s 2024 communications intern.