AUGUSTA, Maine — The U.S. Supreme Court looks likely to end a Maine law allowing governments to seize homes due to unpaid taxes and keep the profits, a practice that has been debated for years here.
Justices on the high court seemingly agreed during a Wednesday hearing that Hennepin County, Minnesota, violated the Constitution’s ban on the taking of private property without “just compensation” when it seized a woman’s condominium in 2015 due to $2,300 in unpaid taxes, sold it for $40,000 and then kept the proceeds. A decision is expected in June.
Maine joins Minnesota and 11 other states, along with Washington, D.C., in having laws that allow local and county governments to keep the excess money from seized property sales, according to the Pacific Legal Foundation, a California property-rights group that is representing Geraldine Tyler, the 94-year-old Minnesota woman.
Most states have laws allowing governments to sell tax-delinquent properties when a redemption period expires, or 18 months after the government files a tax lien. But Maine is among those that allow towns or the state in unorganized areas to keep proceeds from sales beyond the amount of taxes a homeowner owed, unlike how foreclosures are handled.
If the high court rules in the Minnesota woman’s favor later this year, Maine and other states “may have to act very quickly to change their tax statutes because otherwise municipal governments are going to be left without state guidance,” David Deerson, a Pacific Legal Foundation attorney, said.
The foundation describes those laws as “home equity theft.” From 2014 to 2021, it found 43 Maine homes were taken this way, with owners losing $167,000, or 88 percent, of their equity on average. The Maine town with the most seizures during that period was York, which had 12. Homeowners lost about $287,000 in average equity there, the foundation said.
In 1974, the Maine Supreme Judicial Court upheld the state’s foreclosure-related law by siding with the city of Auburn in a case involving a property seized over an unpaid $399 tax bill. The issue is being debated in Augusta now. Rep. Chad Perkins, R-Dover-Foxcroft, introduced a bill this year requiring municipalities to notify the former owners of the available excess money.
If the owners failed to claim the surplus funds within 90 days, then the local governments could keep the money. Perkins’ bill is sponsored only by Republicans, but the legal aid group Pine Tree Legal Assistance and Maine Credit Union League also back it. The administration of Gov. Janet Mills, a Democrat, cited technical concerns but agreed with the mission of the bill.
Limits on the practice proved popular in 2018 after former Gov. Paul LePage took up the cause of an Albion couple whose home was seized over $4,000 in unpaid taxes. His measure was opposed by the Maine Municipal Association and mayors, but it was enacted after changes that watered down the bill but still added protections for those 65 and older.
“MMA is concerned and keeping an eye on the decision,” Kate Dufour, a lobbyist for the Maine Municipal Association, said of the Minnesota case.
The government-initiated practice has drawn more national attention after the Supreme Court heard arguments, with both liberal and conservative justices signaling support for an argument that the state violated Tyler’s Fifth Amendment rights by taking her condominium without adequate compensation.
Hennepin County has argued Tyler did nothing to try to keep her condo or pay off the tax bill for five years until the government seized the property and later sold it. Minnesota and several other states — but not Maine — have submitted briefs backing the county, arguing a ruling in favor of the former condo owner could hamper governments that rely on property taxes.
Briefs filed in support of the Minnesota woman in the Supreme Court case have come from business and real estate groups as well as people who went through similar ordeals, mirroring the coalition that has emerged on both sides of the issue in Maine.
“I’m embarrassed now that we didn’t see the constitutional argument that is being made now,” said Tom Cox, a Yarmouth-based lawyer who is credited with exposing the “robo-signing” scandals of the 2010 foreclosure crisis.