A Massachusetts family has filed a lawsuit challenging a state law that allows private investors to “steal” the equity that homeowners hold in their property over relatively small tax debts.
The lawsuit, known as Mucciaccio v. Town of Easton and Tallage Lincoln LLC, was filed Jan. 6 in Massachusetts Superior Court.
The legal action takes aim at what some call “home equity theft,” which is reportedly widespread in the Bay State, according to the Sacramento, California-based Pacific Legal Foundation (PLF), a public interest firm that’s representing the Mucciaccio family for free. PLF says it’s committed to ending home equity theft across the country.
“The Massachusetts tax foreclosure system is particularly egregious and a recipe for cronyism because it regularly grants massive windfalls to private lienholders,” PLF said in a statement. “The average foreclosed property value exceeds the average tax debt by a ratio of 50:1. In just one year, municipalities and private investors stole over $56 million in property equity from Massachusetts residents.”
The Mucciaccios’ lawyer, Joshua Polk, told The Epoch Times, “Massachusetts law allows municipalities to transfer a homeowner’s equity to private companies for a profit, and that plainly violates the U.S. Constitution. While government and its agents can foreclose on homes to settle back taxes, they can’t collect more than they are owed.”
Under the practice, a tax enforcement entity, typically a county or city, can seize property from those who fall behind on their taxes, then sell the property for sums often significantly larger than the initial debt, and pocket the proceeds from the sale.
Massachusetts is one of a shrinking number of states that allows local governments and private investors to reap windfalls when they take property. In a case brought by PLF, the Michigan Supreme Court found a similar law in that state unconstitutional, ruling that people have a right to any surplus equity in their homes after back taxes are settled, as The Epoch Times reported last year.
In the case at hand, the town of Easton, Massachusetts, and a private company took the family home of Mark Mucciaccio, which has an assessed value of $276,500—over a $4,300 tax debt, according to PLF.
For four generations, the Mucciaccio family lived in a modest house in Easton, according to PLF.
When Mark’s mother died in 2006, he and his brother took over their childhood home from their father. But the brothers fell on hard times as the family experienced medical issues and financial hardships, and started falling behind on taxes.
Both brothers are working-class earners, according to a summary provided by PLF, and starting in 2013, financial hardship left them struggling to pay their property taxes. They managed to pay off that year’s taxes—plus the interest and costs—in 2014. From there, however, their financial problems snowballed because of a series of family medical troubles.
In 2016, they were unable to pay their taxes. Easton sold a tax lien to the private, Boston-based investment firm Tallage Lincoln LLC, which eventually allowed the company to take the house, and with it, all of the Mucciaccios’ home equity.
On Nov. 11 last year, Tallage sent a realtor to the Mucciaccios’ home with an offer to let them buy back the home for $138,000. Both Mark and fellow resident Neil, his brother, were recently put out of work due to COVID-19. But even if the Mucciaccios could find work and get a loan, they would still lose more than $100,000 in home equity, so they rejected the offer.
“The foreclosure and transfer of absolute title to Tallage divested the Mucciaccios of roughly $250,000 of equity—the Property’s value in excess of the encumbering tax debts,” according to the legal complaint. “The equity taken from the Mucciaccios exceeded the tax debt by nearly 15 times.
“Had the Mucciaccios known that their entire property was at risk of being taken, including all the equity value they have built up in the Property, they would have sought a loan, payment plan, or other arrangement to satisfy their tax debt to the Town as they had done in the past.”
The Mucciaccios—five people in all—still live in the home even though they no longer legally own it. They cannot be removed from the premises because a pandemic-related eviction moratorium is in effect.
A home’s equity is just as much property as a home itself and cannot be taken by the government without just compensation, PLF attorney Polk told The Epoch Times.
“The reality is the government can foreclose for a tax debt, but they simply can’t collect more than what was owed,” he said.
The current system in Massachusetts “impacts society’s most vulnerable people.”
Easton officials couldn’t immediately be reached for comment.