Supreme Court Rules in Favor of Homeowner in Takings Clause Case

by: Matthew Erickson
26 May 2023

On May 25, 2023, the United States Supreme Court issued their unanimous decision in the matter of Tyler v. Hennepin County.  The question posed to the Court in this matter was whether a government body, who has taken real property under the guise of an unpaid tax debt, can sell that property for an amount in excess of that tax debt and keep the excess proceeds from the sale without violating the Takings Clause.  Here the entire Court agreed that the government violated the Takings Clause of the United States Constitution by keeping more than what was necessary to satisfy the tax debt.  This matter was one of three matters that were before the United States Supreme Court under the representation of our colleagues at the Pacific Legal Foundation, a nonprofit legal organization that represents individuals that have had their civil rights violated by the government.

The Takings Clause of the United States Constitution is one of the many important clauses contained with the 5th Amendment to the Constitution.  Finishing off the Amendment, the Takings Clause states: “… nor shall private property be taken for public use, without just compensation.”  This clause has been evaluated many times since it was included in the Bill of Rights and has, by virtue of the 14th Amendment, been applied to non-federal takings.

In this matter, the homeowner was a 94-year-old woman named Geraldine Tyler who had purchased the property in 1999 and lived there until she was moved by her family to a senior community in 2010.  Her family thereafter neglected to pay property taxes on the property.  By 2015, roughly $2,300 of unpaid taxes and $13,000 in interest and penalties had accrued on the property.  The property was seized by Hennepin County and sold for $40,000.  That sale extinguished the $15,000 debt.  Hennepin County kept the remaining $25,000 of the sale proceeds for its own purposes.

Tyler filed an action against Hennepin County saying the County had unconstitutionally retained the excess profit on the house.  She claimed that this violated the Takings Clause and the Excessive Fines Clause of the 8th Amendment.  Her action was dismissed by both the District Court and the Eighth Circuit saying that state law governed when it said that there was no property interest in the surplus proceeds from the sale. Thus, those courts found that no unconstitutional taking had occurred.

The Supreme Court accepted the matter and ruled that the remaining equity amount from the sale was a property interest for purposes of the Takings Clause and therefore, by taking that extra amount which went beyond the taxes and interest owed, the government was taking more than its share of the homeowner’s property saying “[t]he taxpayer must render unto Caesar what is Caesar’s, but no more.”  The Court reasoned that the government can only take its due, and not the entirety of someone’s interest.

Whether this decision will affect the current tax sale scheme in New Jersey is another question.  The government’s process in Minnesota is slightly different from the process New Jersey goes through when there is a tax debt on real property.  While the County here directly sold the property after taking possession, in New Jersey, municipalities offload the foreclosure of properties to tax sale certificate holders.  Municipalities are required to perform at least one tax sale per year if they have delinquent property taxes and/or municipal charges.  During the tax sale, bidders can purchase tax sale certificates which act as a lien upon the property.  The property owner can redeem these certificates by paying the unpaid taxes and interest that has accrued on the certificate.  If they do not pay within two years, the holder of the tax sale certificate can initiate proceedings in New Jersey Superior Court to foreclose on the property.  This decision may have an impact on New Jersey’s tax sale certificate scheme, but what impact that may be is speculative at this point.

For previous discussion of this matter, see this blog post from our very own Joe Grather.  The Court’s entire decision can be found here.

If you, as an owner, are concerned about your property taxes and your ability to pay them, competent property tax counsel may be able to help.  Please do not hesitate to reach out to us for your free property tax appeal consultation.  Contact McKirdy, Riskin, Olson & DellaPelle, P.C. to speak with an experienced property tax attorney.