IN-DEPTH: Losing Your Home Over a Missed $588 Property Tax Bill—In 12 States, Government Can Seize Your Home, Keep All Proceeds

IN-DEPTH: Losing Your Home Over a Missed $588 Property Tax Bill—In 12 States, Government Can Seize Your Home, Keep All Proceeds
Tawanda Hall lost hundreds of thousands of dollars in equity in her house over some $22,000 in overdue taxes. (Courtesy of Pacific Legal Foundation)
Petr Svab

It was a dream come true—or rather about to come true—when the Halls bought their forever home. It had everything they needed and more: five bedrooms, four bathrooms, a family room, a dining room, a roomy garage, good schools, and a good neighborhood. Sure, it was a fixer-upper, but they felt up to it. Prentiss Hall, a home improvement contractor, made it his life project, and everybody lent a hand—his wife, Tawanda Hall; his six children; his cousins; and his friends.

“We were really excited,” Tawanda Hall told The Epoch Times.

They negotiated the price down to $67,000—a bargain, perhaps, but the home demanded a daunting amount of “tender love and care.”

“The house had been sitting there for a while. I guess it had mold in it, and it needed new windows and doors and electric,” she said.

“The city made us get all kinds of permits to get the house up to code. So we went in there and just started working.”

It took about a year before they were able to move into the home in the quiet Detroit suburb of Southfield, Michigan. And it was several years before they felt “comfortable” with it, according to Tawanda Hall.

The result was worth it.

“It was a dream home. It was big enough ... for our family to be there, we had plenty of rooms, big enough to have our holiday dinners, and everyone can come and be comfortable,” she said.

For a Detroit girl, it was nice to have a peaceful place to live, away from all the noise and hustle.

“We just hoped and planned to stay and grow and raise grandchildren and, you know ...” she paused before her voice trailed into a sigh.

Shattered Dreams

Several years in, the Halls got into financial trouble. Tawanda Hall’s handicapped brother and her sick mother moved in with them, even as all their money still went into improving the house.

“We just had a lot of things happening at once,” she said. “Before I knew it, I was behind on all my taxes.”

Property tax on the 3,700-square-foot home ran at more than $5,000. In a few years, the debt ballooned to more than $22,000, including interest and fees.

In February 2018, Oakland County foreclosed on the home.

The next month, the county put the Halls on a payment plan of $650 per month, intended to allow them to get the house back. They prepaid a few months in advance and were told that they didn’t need to worry about timely payments as long as they caught up on the payments by February 2019, according to court documents reviewed by The Epoch Times (pdf, pdf).

In June 2018, however, the county suddenly transferred the property to the City of Southfield, Michigan, which had a preferential right to buy foreclosed properties for the price of the debt.

The Halls were informed they had to move out.

Four months later, the city gave the property to a private company, Southfield Neighborhood Revitalization Initiative, for $1.

In early 2020, the house was put on the market and then sold for more than $300,000.

To the Halls’ shock, they learned that they weren’t entitled to a single penny of that payout.

“I feel like someone stole from me and my family,” Tawanda Hall said.

Less than a month later, Prentiss Hall passed away. The loss of the house put him under enormous stress, and his health deteriorated, she said.

Widespread Problem

Thousands of Americans have been put in a similar position—losing their homes and other properties over tax debts that only represented a small fraction of the property value.

In most of the country, such a practice is illegal. Local authorities are allowed to foreclose on properties over unpaid taxes, but they’re required to sell them and return to the owners everything above what they owe.

Twelve states and the District of Columbia allow governments to keep the whole property and all sales proceeds: Maine, Massachusetts, New York, New Jersey, Illinois, Alabama, Minnesota, South Dakota, Nebraska, Colorado, Arizona, and Oregon.

A foreclosure sign is posted in front of a home for sale in Stockton, Calif. on April 29, 2008. (Justin Sullivan/Getty Images)
A foreclosure sign is posted in front of a home for sale in Stockton, Calif. on April 29, 2008. (Justin Sullivan/Getty Images)
Another nine states have various loopholes, mostly allowing the government to keep such properties for public use (including Alaska, California, Idaho, Nevada, Ohio, and Rhode Island). Montana allows the government to keep all proceeds from the sale of commercial properties, not residential ones. Texas allows governments to sell properties at a discount in some circumstances. Wisconsin allows governments to keep the properties, but if they sell them, excess proceeds go back to the original owners, according to Pacific Legal Foundation (PLF), a nonprofit that has been tracking and litigating the issue.

Between 2014 and 2021, this practice has cost homeowners more than $860 million in home value, spread over some 6,200 homes. But those are only the cases that the PLF was able to document by looking at the more populous counties in the 12 states and only at homes for which there was enough information available. For thousands more, there wasn’t enough information. And there are untold more that the PLF hasn’t looked at yet.

Most of the lost equity was wasted by selling the houses at a deep discount. About $30 million actually ended up in government coffers, while another about $280 million was pocketed by private investors who buy property tax debt from governments and then foreclose on the homes and sell them, based on data from nearly 4,700 property sales.

Legal Battle

For PLF lawyer David Deerson, the issue boils down to theft.

“It’s true that the government can take your property with few limits, but one of the limits is, whatever it takes, it has to pay you for it,” he told The Epoch Times.

Governments have been defending the practice on “legalistic” grounds, in Deerson’s view.

“It’s commonly understood that property rights are not created by the Constitution,“ he said. ”They’re protected by the Constitution, but they’re created by other sources of law, such as state law.”

Thus, governments have argued that property owners don’t own the value of a property in excess of a debt unless the specific state law says so.

“There can’t be a property right in equity because if you look at the way the statutes are written, they don’t provide you with a chance to get your equity back,” Deerson said, explaining the governments’ argument.

PLF and a lineup of legal and advocacy groups across the political spectrum disagree.

“In every single other context you can possibly imagine, equity is treated as a property right,” he said.

In a divorce, equity in a home is treated as part of the wealth being divided. In a private foreclosure, the bank can’t take a penny beyond what it’s owed.

“Of course, they have to pay you back the surplus equity. Why? Because you have a property right to it,” Deerson said.

“Equity isn’t treated as a property right only if it’s the government itself trying to take it.”

In 2020, PLF secured a ruling by the Michigan Supreme Court that outlawed the government practice of keeping extra proceeds from tax foreclosures in the state. That should have resolved Tawanda Hall’s case, but the government has continued to litigate the issue in federal courts.

In October 2022, the U.S. Court of Appeals for the 6th Circuit, which covers Michigan, ruled that the practice was unconstitutional, but the state government appealed to the U.S. Supreme Court, leaving the case pending.

Earlier this year, the Supreme Court announced that it would pick up a similar case in Minnesota, where a 94-year-old grandmother lost her condo over some $15,000 in unpaid taxes and fees. The local government sold the condo for $40,000, again keeping every penny.

The U.S. Supreme Court in Washington on March 23, 2023. (Richard Moore/The Epoch Times)
The U.S. Supreme Court in Washington on March 23, 2023. (Richard Moore/The Epoch Times)

PLF is in the process of arguing the case before the Supreme Court, with the first hearing scheduled for April 26.

The case, Tyler v. Hennepin County, could decide the fate of Tawanda Hall and thousands of others.

“I’m hoping that they can change the law because it’s unfair to a lot of families who put their lives into their homes,” Tawanda Hall said.

‘Wrong’ Argument

While the issue may seem clear-cut, courts have been split on it for decades.

In Nebraska, the state’s Supreme Court has affirmed the practice. So did, last year, the federal appeals court for the 8th Circuit, which covers several states that allow the practice—Nebraska, South Dakota, and Minnesota.

It was the split between the 6th and 8th Circuits, both stemming from PLF cases, that likely prompted the Supreme Court to pick up the issue, according to Deerson.

He didn’t think the Nebraska Supreme Court was malicious in its ruling.

“We just think the court got it wrong,” Deerson said.

The court indicated that “basically because this process has been in place for a long time that it must be constitutional,” he said.

“That is not a principle of law that we agree with,” Deerson said.

Governments have also argued that the threat of losing the whole property serves as a deterrent against tax delinquency. In that sense, the lost equity could be seen as a form of penalty.

That still wouldn’t pass constitutional muster, according to Deerson.

“Yes, the government can charge fines, but they have to be proportional to whatever the offense committed was. And failing to pay your taxes—it’s not a crime; it’s a civil infraction,” he said.

If a government were to try to confiscate a house as a form of a tax delinquency fine, “then it certainly looks like an excessive fine, which is prohibited by the Eight Amendment of the Constitution,” Deerson said.

Falling on Hard Times

Usually, there’s no criminal intent in tax delinquency, according to Deerson.

“It’s usually a result of simply not being able to afford it or not understanding the process,” he said.

Kevin Fair, for example, quit his job at a locksmith service to care for his wife, who was suffering from multiple sclerosis.

“I didn’t want to leave her by herself, and I couldn’t afford to hire somebody to come over and watch her, so I quit my job to stay home with her, and we used what little money we had in savings to pay the medical bills,” he told The Epoch Times.

Kevin Fair is facing eviction and a loss of more than $50,000 in equity in his home over some $5,000 in overdue taxes. (Courtesy of Pacific Legal Foundation)
Kevin Fair is facing eviction and a loss of more than $50,000 in equity in his home over some $5,000 in overdue taxes. (Courtesy of Pacific Legal Foundation)

In 2014, he missed the $588 property tax bill on their small house in Scottsbluff, Nebraska. The tax lien was bought by a private investor, Continental Resources, which then started to pay his tax bills and pile up 14 percent interest on top of them.

By 2018, the debt snowballed to more than $5,000. Fair was informed that he either had to pay the sum in a few months or the company would acquire possession of his house, which, according to PLF, is worth about $60,000.

That wasn’t feasible for Fair, whose wife passed away and who now lives off $900 monthly from Social Security.

His monthly bills alone can run up to $600, leaving precious little to live on.

“This month right now, I don’t have any money. Period. I am broke,” Fair said.

“I eat a lot of lunchmeat and stuff like that because that’s the only thing I can afford. And if they kick me out of the house ... I’ll be wandering around on streets,” he said.

The PLF was able to negotiate for Fair, now 66, to be able to stay in the house while the Supreme Court case is pending.

Fair said he would be willing to move if he could keep the extra cash after the house is sold. Alternatively, he hopes he can work out a deal with the company that now owns his home—paying it rent, for example.

“It just doesn’t seem right for them to be able to do this,” he said.

Hard to Challenge

In some jurisdictions, tax foreclosure laws have gone virtually unchallenged.

“People who’ve failed to pay their property taxes, for reasons you can imagine, are often some of the people who are least capable of fighting back against government abuse,” Deerson said.

“I mean, people aren’t intentionally neglecting to pay their property taxes. They’re not gleefully ignoring the law. They’re often elderly, they’re impoverished, they’re ill, or they’re dealing with an illness in their family. And for the same reasons that they’re struggling to keep up with their property taxes, they’ll also struggle to find adequate representation to understand what their rights are and what they can do to push back.”

In Massachusetts, the PLF represented several clients in situations similar to Fair’s, with a private company buying their debt and then foreclosing on their homes. In all such cases, the company agreed to settle the case before the courts got a chance to consider the law’s constitutionality, according to PLF attorney Josh Polk.

“We’re talking about a huge cash cow here. Investors are able to purchase a tax lien for a couple thousand dollars and then go on and sell the property for hundreds of thousands of dollars, taking a massive windfall at the expense of taxpayers,” he told The Epoch Times.

“And so it’s unsurprising that they’re eager to settle rather than take this up to the Massachusetts Supreme Court.”

A few years ago, the state’s highest court “seemed to signal that it wanted to hear the issue but had not been presented an opportunity,” according to Polk.

“And so we were anxious to give it the opportunity,” he said.

The case of Alan DiPietro could do the trick.

In 2014, DiPietro bought five lots totaling 34 acres.

“I wanted to bring my alpacas over,” he told The Epoch Times.

DiPietro has been raising the South American animals since 2008 for their fine fleece, and the property gave him hope to finally bring the business to some semblance of profitability.

Instead, the town of Bolton, Massachusetts, buried him under a pile of red tape, including a lawsuit over his supposed disturbance of a wetland on his property.

Before long, he was behind on his taxes.

Alan DiPietro faces eviction from his land and a loss of more than $300,000 in equity over about $60,000 in overdue taxes. (Courtesy of Pacific Legal Foundation)
Alan DiPietro faces eviction from his land and a loss of more than $300,000 in equity over about $60,000 in overdue taxes. (Courtesy of Pacific Legal Foundation)

What started in 2017 with $6,116 in missed payments expanded to about $60,000 in just four years.

He tried to sell one of the lots to pay off the debt, but the town wouldn’t issue him the permits necessary to make the lot suitable for sale. The town reasoned that he couldn’t get the permits because he was behind on taxes.

“I said, ‘Well, I’m trying to sell this to pay the taxes. If you give me the permits, I’ll sell the property, the one lot, and I’ll pay the taxes,’” he said. “Well, they didn’t like that idea.”

DiPietro tried other ways: cut some timber on the land and sell it—the government blocked it; grow hemp on the land—the government blocked it, he said.

“They just used it as a leverage against me,“ he said. ”They knew that they didn’t have to deal with me.”

In the end, the local government foreclosed on the property and proceeded to evict DiPietro.

“We’ve been fighting it in the state court,” he said.

The case has been on hold pending the resolution of the PLF’s Supreme Court case.

‘Take the Money and Run’

If the case goes his way, DiPietro would still lose the land. But since it’s worth some $370,000 in the PLF’s estimate, he would at least have money to start anew.

“I don’t have much choice at this point. I’d rather have something than nothing,” he said. “Obviously, I’d rather stay here and continue what I was doing, but the way the town has been, you know, I might be happy just to take the money and run.”

DiPietro would run far, too.

“I’d probably move south. I think I’d be done with Massachusetts,” he said.

The atmosphere in the state has gotten too controlling, DiPietro suggested.

“I’ve lived here my whole life, and unfortunately, the people around here ... they’ve got some crazy ideas about what they can and can’t tell their neighbors to do. It’s not really a live-and-let-live situation anymore. There are some people who think that they get to dictate every part of your life,” he said. “I get 34 acres. I’m farming it. I’m not harming anyone. I don’t need them making up issues to come over and harass me about. It’s just not how I want to live anymore.”

Alan DiPietro feeding one of his alpacas. (Courtesy of Pacific Legal Foundation)
Alan DiPietro feeding one of his alpacas. (Courtesy of Pacific Legal Foundation)

Like many others, DiPietro had no idea that in Massachusetts, the government gets to keep foreclosed properties wholesale.

“It’s just legal theft. I mean, it’s bad enough you have to pay the property tax on something you already own, but then they’re going to take everything? I was just amazed,” he said.

“And unfortunately, I’ve been left with zero options. If I could have sold, I probably would have moved out of here several years ago already, you know? It’s a funny thing. It’s like they want me out, but they give me no options to leave.”

Correction: A previous version of this article misspelled Tawanda Hall’s name. The Epoch Times regrets the error.