Not Theirs for the Taking: SCOTUS Rebuffs County’s Full Property Seizure

 |  Share

From Cicero’s De Officiis to the Magna Carta and the homesteaders of 1862 to the millennials of 2023, humankind has long recognized the importance of a place to call home. Codified in the Fifth Amendment (“…nor shall private property be taken for public use, without just compensation”) and bolstered by over 200 years of case law and constitutional interpretation, one wouldn’t think that property rights here in the United States remained a particularly confusing issue. But one Minnesota county felt otherwise, and its case against a 94-year-old property owner made its way all the way to the Supreme Court of the United States.

The Court’s opinion last month in Tyler v. Hennepin County[1] paints a fairly sympathetic picture: An elderly property owner who is delinquent in the payment of her real estate taxes had her property seized and sold by the county to satisfy the tax debt. But the County didn’t stop there — instead keeping the surplus of the sale as well, thereby enriching the County by an additional $25,000 over and above the amount of the tax debt. In a unanimous decision authored by Chief Justice John Roberts, the Court ruled that by keeping the surplus of the sale, the County effected a “classic taking” under the Fifth Amendment and that the property owner was entitled to just compensation. The Court did not strike down the county’s ability to seize and sell the property to satisfy the tax debt, only its ability to retain the surplus. As noted in the opinion, this principle has existed as far back as 1215 when King John signed the Magna Carta at Runnymede, through the early history of U.S. states.

By reaffirming this fundamental property right and striking down the proposed “home equity theft” by Hennepin County, the Court engaged in a lengthy discussion of the history of tax debt collection, beginning with the Magna Carta wherein the Crown swore that the property of the debtor could only be seized “until the debt which is evident shall be fully paid to us; and the residue shall be left to the executors to fulfil the will of the deceased” through the present day and the Court’s own various precedents. The Court noted that in contrast to the law at issue with Tyler, Minnesota state law expressly forbids the state from retaining the surplus in the event of a sale of property related to a taxpayer’s failure to pay income taxes or personal property taxes (such as vehicle excise taxes). Likewise, Minnesota prohibits private creditors and banks from retaining the surplus of any sales of real property. The Court applied its prior holding in Phillips v. Washington Legal Foundation to hold that Minnesota, and the county “may not extinguish a property interest that it recognizes everywhere else to avoid paying just compensation when it is the one doing the taking.” The Court also adopted clear and strong language from the Sixth Circuit ruling in Hall v. Meisner LLC, stating “…the Takings Clause would be a dead letter if a state could simply exclude from its definition of property any interest that the state wished to take.”

The Court rejected the county’s argument that since Tyler’s mortgage and HOA fees exceeded the value of the $25,000 surplus, Tyler was not harmed by the forfeiture. The Court noted that Tyler remained personally liable for those debts and was thus financially harmed by the county keeping her money.

Minnesota is not the only place with a home equity theft problem. Massachusetts, where the median sales price of a single-family home is more than $570,000, is another illustrative example. Under G.L. c. 60 sec. 53 , a municipality can issue a notice of taking after a taxpayer is delinquent in their payment of taxes for just 14 days. Like Minnesota, Massachusetts has no mechanism available for the owner to recover any surplus from a taking. While logic dictates that the property owner would just pay the taxes due during the process before the parcel is taken, sometimes that can’t or doesn’t happen. Notably, there was an amicus brief submitted in the Tyler case by Massachusetts attorneys due to  the similarities of their case to Tyler. In the Massachusetts matter, the Town of Bourne instituted a tax taking of a property owned by an individual with a long-term disability due to non-payment of real estate taxes. The owner tried to exercise his right of redemption after the notice of taking, but passed away during the process. The property, worth between $330,000 and $500,000 at the time of the taking, could no longer be reached by the personal representative of the former owner’s estate — all due to just $899.28 of unpaid property taxes. If allowed to stand, the taking would create a windfall for the town. In fact, the amicus brief noted a study of Massachusetts Land Court records from 2013 and 2014 revealed that Massachusetts municipalities collected approximately $56.6 million more from their taxpayers than was owed in unpaid taxes, in one year alone. See Ralph D. Clifford, “Massachusetts Has a Problem: The Unconstitutionality of the Tax Deed,” 13 UNIV. MASS. L. REV. 274, 284 (2018), citing M.G.L. c. 60, § 53.

To frame the importance of this SCOTUS decision, imagine it had gone the other way. Perhaps, in contrast to Ms. Tyler, the next property owner has significant equity in their property. They may even own it outright and have it as a key aspect of their estate planning strategy. Aggressive pursuit of even the smallest delinquency in taxes could mean a potential forfeiture of hundreds of thousands of dollars for each individual property owner. Had Hennepin County prevailed, municipalities across the country would continue to utilize tax foreclosures as a significant revenue generating mechanism.

In De Officiis, Cicero wrote “The man in an administrative office, however, must make it his first care that everyone shall have what belongs to him and that private citizens suffer no invasion of their property rights by act of the state.” To the benefit of property owners across the country, the Supreme Court once again reaffirmed this ancient proposition.


This DarrowEverett Insight should not be construed as legal advice or a legal opinion on any specific facts or circumstances. This Insight is not intended to create, and receipt of it does not constitute, a lawyer-client relationship. The contents are intended for general informational purposes only, and you are urged to consult your attorney concerning any particular situation and any specific legal question you may have. We are working diligently to remain well informed and up to date on information and advisements as they become available. As such, please reach out to us if you need help addressing any of the issues discussed in this Insight, or any other issues or concerns you may have relating to your business. We are ready to help guide you through these challenging times.

Unless expressly provided, this Insight does not constitute written tax advice as described in 31 C.F.R. §10, et seq. and is not intended or written by us to be used and/or relied on as written tax advice for any purpose including, without limitation, the marketing of any transaction addressed herein. Any U.S. federal tax advice rendered by DarrowEverett LLP shall be conspicuously labeled as such, shall include a discussion of all relevant facts and circumstances, as well as of any representations, statements, findings, or agreements (including projections, financial forecasts, or appraisals) upon which we rely, applicable to transactions discussed therein in compliance with 31 C.F.R. §10.37, shall relate the applicable law and authorities to the facts, and shall set forth any applicable limits on the use of such advice.

[1] 598 U.S. ___ (2023)