Can the Government Keep the Change? Tax Foreclosure and Your Property Rights

Imagine the government seizes your home over $15,000 in unpaid property taxes, sells it for $40,000, and keeps every dollar of the profit. That is exactly what happened to Geraldine Tyler in Hennepin County, Minnesota. And for years, many states operated under laws that made it perfectly legal.

The question before the U.S. Supreme Court in Tyler v. Hennepin County was simple: Can the government take more than it is owed through a tax foreclosure? In May 2023, the Court gave a unanimous answer. No.

This decision matters for every property owner in America, including those here in New Jersey.

What Is Tax Foreclosure?

Tax foreclosure is a legal process that allows a government to take ownership of a property when the owner fails to pay property taxes. Once taxes go unpaid for a set period, the government can foreclose on its tax lien, take title, and sell the property to recover the debt.

In most states, any proceeds beyond the amount owed in back taxes are returned to the owner. But in Minnesota and a handful of other states, the government was legally allowed to keep the full sale price, including the surplus equity.

That surplus equity is what put Tyler on the docket of the highest court in the country.

The Tyler v. Hennepin County Case

Geraldine Tyler was a 94-year-old woman who owed $15,000 in property taxes on her Minneapolis condo. She had moved to an assisted living facility and could not pay. Hennepin County foreclosed on the property, took title, and sold the condo for $40,000.

Under Minnesota law, the county kept the full $40,000. Tyler’s $25,000 in equity simply disappeared.

Tyler sued, arguing the county had violated the Fifth Amendment’s Takings Clause. Lower courts dismissed her case. The Supreme Court took it up and reversed those decisions entirely.

The situation also raises a broader question for New Jersey property owners. If your assessment seems arbitrary or excessive, knowing that you can appeal property tax assessment decisions through the proper legal channels is the first step toward protecting what is yours.

What the Supreme Court Decided

On May 25, 2023, the Supreme Court ruled 9-0 in favor of Tyler. Chief Justice John Roberts wrote the majority opinion, holding that Tyler had a property interest in the surplus equity of her home.

The Court found that the government’s retention of the $25,000 surplus was a “taking” under the Fifth Amendment, requiring just compensation. Minnesota’s law, which let the government keep all proceeds regardless of the debt owed, was unconstitutional.

During oral arguments, Justice Kagan asked whether the same rule would apply if a $5,000 tax debt justified taking a $5,000,000 home. The government’s attorney said yes. Chief Justice Roberts then asked, aloud, what exactly is the point of the Takings Clause.

It is worth noting that some commentators have pointed to cases like this when debating efforts to abolish property taxes altogether, viewing them as evidence of systemic overreach. The Tyler ruling shows, however, that constitutional guardrails can work when property owners are willing to fight for them.

The Takings Clause: What “Just Compensation” Really Means

The Fifth Amendment prohibits the government from taking private property for public use without paying just compensation. For most people, the Takings Clause comes to mind in the context of eminent domain, where the government physically acquires property for a highway, school, or public project.

Tyler extends that reasoning to tax foreclosure situations where the government takes more than it is legally owed. The Court confirmed that the excess equity belongs to the owner, not to the state.

This principle is foundational. If you are a property owner facing condemnation proceedings or a government seizure and want to understand how to fight eminent domain actions in New Jersey, the Takings Clause is frequently your most powerful legal argument.

What This Ruling Means for NJ Property Owners

New Jersey has its own tax foreclosure laws. The state generally requires that surplus proceeds from a tax sale be returned to the property owner, which puts New Jersey ahead of states like Minnesota. But the Tyler decision matters here for a different reason.

It reinforces the constitutional baseline that no state law can fall below. And it sends a clear message to government entities at every level: property owners have rights, and those rights have teeth.

New Jersey already carries the highest property taxes in the nation, with a median annual bill of $9,413 as of 2024. When taxes are this high, every assessment, every appeal, and every foreclosure proceeding carries real financial weight for real families and businesses. If you are in a dispute involving a government taking, working with a seasoned eminent domain attorney New Jersey property owners rely on can be the difference between recovering your equity and losing it entirely.

Whether you are navigating a redevelopment designation, a condemnation notice, or a disputed tax lien, understanding your constitutional rights is where every strong case begins.

Your Property Rights Are Worth Fighting For

The Tyler decision is a landmark win for property owners everywhere. But it did not happen automatically. It happened because a 94-year-old woman with limited resources had the determination to challenge a system that had taken more from her than it was entitled to take.

Most property disputes do not make it to the Supreme Court. They get resolved through tax appeal proceedings, negotiation, or litigation at the state level. Having the right advocate matters at every stage of that process.

If your property has been overassessed, if you have received a condemnation or foreclosure notice, or if you simply want to know where you stand before a deadline passes. A qualified property tax appeal attorney can help you understand your options. They can also protect your interests.

The government does not always get it right. And when it does not, you have the right to push back.

Think Your Property Rights Are at Risk?

If you are facing a tax foreclosure, an inflated assessment, or a government taking, the attorneys at McKirdy, Riskin, Olson & DellaPelle, P.C. have been defending New Jersey property owners since 1967. We offer free consultations and work on contingency for qualifying cases. Schedule my free consultation today.