Supreme Court Will Weigh In On How Much Of Your Property Government Can Take

It isn’t often that the United States Supreme Court weighs in on issues that affect real estate, but that’s exactly what is expected to happen in the upcoming months. Although the case is from Minnesota, because there are constitutional issues, the case may have an effect on real estate issues everywhere.

Constitutional Taking?

The case has to do with the constitution’s prohibition on two things. The constitution prohibits what are known as excessive fines being levied by the government against people, and the restriction on the government’s ability to just take or seize people’s private property.

To understand the case, it is important to understand how it works when the government takes or forecloses on property, such as when there are property taxes owed.

Normally, if the government seizes your real estate and sells it, the government takes what you owe to it, and then gives the balance of the sale proceeds (if there are any) back to the owner.

So, if someone has a $100,000 home, and owes $10,000 in property taxes to the government, the property could be sold (foreclosed on) by the government. If the property is sold at public auction for $100,000, the government would take its $10,000, and return the remaining $90,000 balance back to the property owner.

Minnesota Takes it All

But that’s not how things go in the State of Minnesota. In Minnesota, the government can sell the property for what the homeowner may owe to the government, and keep any excess. In our example above, that would mean the government would keep that excess $90,000—it wouldn’t be returned to the owner.

That’s exactly what happened to one Minnesota resident, who owed $15,000, and the government sold her property for $40,000 to pay the debt. However, based on Minnesota law, the government kept every penny of the full $40,000 sale price.

Homeowner Cries Foul

The homeowner said that the government’s keeping of the excess funds, which came to $25,000, is an illegal taking of property under the takings clause of the United State constitution. The homeowner also said that if that was supposed to be some sort of penalty or punishment, it amounts to an excessive fine, to the point of being unconstitutional.

She isn’t alone: Over one thousand other Minnesota residents in the last ten years have lost the entirety of their property, all because they owed debts that amounted to an average of only 8% of their home’s value. That’s a “penalty” of 94%.

To many, the government’s policy looks like nothing more than stealing someone’s home equity. Lower courts disagreed, and said that Minnesota’s policy was allowed. However, the case has been appealed to the United States Supreme Court, which should rule in the next few months, whether such a policy is illegal and unconstitutional.

Should the court find the practice permissible, do not be surprised to see other state governments adopting these kinds of policies.

Call the West Palm Beach real estate lawyers at The Law Offices of Larry E. Bray today for help today with your real estate closing or real estate law issue or problem.

Sources

pacificlegal.org/case/mn_home_equity_theft/

scotusblog.com/case-files/cases/tyler-v-hennepin-county-minnesota/