Supreme Court Overrules Local Governments for Seizing Homes

The Supreme Court held a special sitting on Sept. 30, 2022, for the formal investiture ceremony of Associate Justice Ketanji Brown Jackson. Collection of the Supreme Court of the United States/Getty Images

The U.S. Supreme Court reversed court rulings in which local governments seized two homes over unpaid tax debts and kept sale proceeds that far exceeded the tax owed.

Critics call the practice “home equity theft.”

The case came after Pacific Legal Foundation (PLF), which represented the homeowners in both cases, released a report late last year saying that 12 states and the District of Columbia allow local governments and private investors to seize dramatically more than what is owed from homeowners who fall behind on property tax payments. PLF is a national nonprofit public interest law firm that takes on governmental overreach.

The U.S. Supreme Court released unsigned orders (pdf) on June 5 summarily reversing two rulings of the Supreme Court of Nebraska.

The nation’s highest court did not explain why it was issuing the orders. No justices dissented.

The judgments of the Supreme Court of Nebraska were vacated and the cases remanded to that court “for further consideration in light” of the U.S. Supreme Court’s unanimous ruling in Tyler v. Hennepin County on May 25.

In that decision, the U.S. Supreme Court ruled that a Minnesota county wronged a 94-year-old grandmother when it forced the sale of her condominium over an unpaid tax debt and kept the sale proceeds that far exceeded the tax she owed.

Geraldine Tyler owned a modest one-bedroom condominium in Hennepin County, but after she was harassed and frightened near her home, she moved to a new apartment in a safer neighborhood. The rent on her new apartment stretched her resources and she fell into arrears on her condo’s property tax bills, accumulating about $2,300 in taxes owed, along with $12,700 in penalties, interest, and costs.

The county seized Tyler’s condo, valued at $93,000, and sold it for just $40,000. Instead of keeping the $15,000 it was owed, the county retained the full $40,000, amounting to a windfall of $25,000.

Tyler sued, arguing that the government violated the Takings Clause of the Fifth Amendment by seizing property in excess of the debt. Her lawsuit was rejected by the courts, including the U.S. Court of Appeals for the 8th Circuit, which found that the legal forfeiture of the property extinguished the owner’s property interest.