WASHINGTON – The Supreme Court agreed Friday to decide a property rights dispute over whether government entities violate the Constitution when they seize homes for failure to pay taxes and then pocket all the proceeds or allow private investors to profit.
Judges will decide whether such seizures violate the condemnation clause of the Constitution’s Fifth Amendment, which requires the government to pay compensation when property is taken. They will also weigh whether the government’s action could be seen as an excessive fine under the Eighth Amendment to the Constitution.
The magistrates will consider a lawsuit filed by geraldine tylera 93-year-old man whose property in Minnesota was seized by Hennepin County because he owed $15,000 in property taxes and related costs. The county sold the home for $40,000 and kept all the proceeds, Tyler’s attorneys say.
The St. Louis-based US Court of Appeals for the 8th Circuit ruled in favor of the county in a February 2022 ruling, rejecting Tyler’s constitutional claims. The state says that, under Minnesota law, it «provides ample opportunity for property owners to protect their interests» before a property is seized. Attorneys for the state say owners have three years to pay the taxes and have the opportunity to buy back the seized property.
The case was brought by the Pacific Legal Foundation, a conservative legal group that often brings property rights cases. The Supreme Court, which has a 6-3 conservative majority, is often sympathetic to property rights claims.
The group said in a report issued last year that a dozen states regularly allow what it calls «home equity theft» and other states have laws on the books that might allow it in some circumstances. The remaining states return the surplus when a seized property is sold.
Six states (Nebraska, Arizona, Colorado, New Jersey, Montana and Illinois) allow private investors to hold equity in properties after back taxes are paid, says the Pacific Legal Foundation. Others allow the government to pocket the remaining capital when the property is sold.