Collecting taxes, Minnesota steals assets of the vulnerable

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In 2015, officials in Hennepin County seized an elderly woman's condo and sold it, over about $2,300 of unpaid property taxes, plus $12,700 in penalties, interest and fees. They sold that home for $40,000 and kept every penny, robbing elderly Geraldine Tyler of her home equity.

And that's just one example. From 2014 through 2021, local governments in Minnesota seized and sold at least 1,350 Minnesota homes. The lost savings amounted to an average of $155,000 per home, or 90% of the home's value. Minnesota is one of 12 states, plus the District of Columbia, still allowing these abusive and unconstitutional "tax and take" seizures.

A recent study prepared by Pacific Legal Foundation details how these predatory tax laws work, and the windfall government has taken at the expense of people like Tyler.

These abusive tax foreclosures are not some kind of administrative error. Instead, they are an intentional policy tactic used by some local government agencies to pad their budgets by stripping property owners of their hard-earned equity.

In Tyler's case, my firm — Pacific Legal Foundation (PLF) — provided her with free legal counsel to fight back against the confiscation of her most valuable asset by detailing how county officials violated her constitutional rights. We recently asked the Supreme Court to hear her case after a federal court dismissed it, a request still pending at the high court.

PLF has already secured a state supreme court victory in Michigan to end home equity theft there. And we recently won a federal appellate case that I expect will also end the theft in neighboring Ohio. PLF will continue to work with clients in other states to fight back against abusive forfeitures and change the laws.

We want to add Minnesota to the list of places where home equity theft is a thing of the past.

In most states, tax foreclosures are treated just like other debts. If you fail to pay your property taxes, the government (or partnering investors) can seize and sell your property to satisfy the debt. But once your debts are paid, the remaining proceeds must be returned to you, the original owner.

But that's not how it works in Minnesota. Here, the county auditor forecloses on delinquent properties after three years, taking absolute title for the state. The government then decides whether to keep or sell the property and disburses all profits from any sale to government entities. The original owners are left with nothing, regardless of how much equity they might have built up in the property over the years.

Unsurprisingly, the victims of these seizures are often vulnerable people like Geraldine Tyler — seniors on a fixed income. Other common victims are people experiencing job loss, health difficulties, mental health challenges or cognitive decline.

When most people learn about the blatant government money grab of home equity theft, they recoil at the obvious injustice. But going beyond the essential unfairness, we should recognize that these predatory forfeitures violate important property rights protections under the U.S. Constitution.

The Takings Clause of the U.S. Constitution's Fifth Amendment requires the government to provide "just compensation" to the owner whenever it takes private property for public use. And the Eighth Amendment's Excessive Fines Clause prevents the government from imposing excessive financial punishments. Surely taking a huge windfall at the expense of someone like Tyler must violate one of these protections.

Fortunately, the tide is shifting. In recent years, four states have changed their tax foreclosure laws to better protect property owners in response to mounting public and media pressure. Minnesota needs to join them and end home equity theft.

Of course, if you fail to pay your property taxes, you'll likely face consequences like penalties or interest, and in the most serious cases, foreclosure. But the government never should take more than it is owed in taxes, interest, penalties and costs. We hope that soon Minnesotans too will be protected and that state-approved home equity theft a thing of the past.

Christina Martin is an attorney with the Pacific Legal Foundation and has provided legal counsel and representation for victims of home equity theft in states across the nation.