"According to the Pacific Legal Foundation, between 2014 and 2021, 43 Maine homes were subject to home equity theft."
The Supreme Court is seen on April 21, 2023, in Washington. Credit: Alex Brandon / AP

The BDN Opinion section operates independently and does not set news policies or contribute to reporting or editing articles elsewhere in the newspaper or on bangordailynews.com.

Nick Murray is the director of policy at Maine Policy Institute, a free-market think tank headquartered in Portland.

Imagine being a retiree who has owned your home for many years. You primarily live off Social Security but do odd jobs on occasion to keep up with the bills.

The COVID-19 pandemic hits. Fearing the virus, given your own vulnerability, you stop taking on those odd jobs and opt to stay indoors. Now you’re relying entirely on Social Security.

As the pandemic rages on and the government responds by spending trillions of dollars, contributing to inflation, you find it increasingly difficult to make ends meet. Grocery, heat and utility bills all rose. Your budget is stretched thinner than ever before.

Now you don’t have enough money to pay your property tax bill on time. The late fees pile up. Eventually, the town seizes your property and sells it. It keeps all the proceeds despite the comparatively small debt you owed.

You can’t even take the equity you built in your old home over the years to resettle elsewhere — the town kept it. You have literally nothing left.

Sadly, laws in 13 states, including Maine, allow this situation to play out. It’s called home equity theft, and it’s time to put an end to it.

Last month, the U.S. Supreme Court  held unanimously that municipalities cannot keep surplus home equity after seizing and selling a delinquent taxpayer’s property to settle the debt.  

The case concerned 94-year-old Geraldine Tyler of Minnesota who failed to keep up with her property taxes, owing nearly $3,000 in taxes and more than $12,000 in late fees to Hennepin County. The county seized her property and sold it for $40,000. But county officials didn’t return the $25,000 she had built in equity — they kept it.

Ultimately, the court sided with Tyler and ruled that local governments cannot take more than what is required to pay off the debt, as such a seizure conflicts with the takings clause of the Fifth Amendment. This clause prohibits the government from taking property from individuals without just compensation.

This happens in Maine, too. According to the  Pacific Legal Foundation, between 2014 and 2021, 43 Maine homes were subject to home equity theft. On average, the owners of those homes lost $167,000, or 88 percent, of the equity they had built. Those individuals lost a total of $4 million combined in equity. Sixty-five percent of those seizures were for tax debts less than the cost of a 10-year-old Ford F-150 pickup truck.

It’s hard to understand the rationale for why such a law would exist in the first place. If a state can strip someone’s property rights because of a tax debt, and allow a local government to seize that property for its own uses, the Fifth Amendment is meaningless.

Of course, you should pay your taxes on time, but it has never made much sense why a local government can seize and sell a property for its full value when only a fraction of that price was owed in debt. It has been — and will always be — theft.

Fortunately, there is a vehicle in the Maine Legislature that would improve the status quo. LD 101, sponsored by Rep. Chad Perkins, R–Dover-Foxcroft, would only allow a town to keep surplus equity in this situation if a homeowner fails to claim it within 90 days.

While this provides an avenue for homeowners to reclaim the equity they lost, even better would be to require towns to return the surplus equity in full to the former homeowner. There is no good reason for local governments to keep these funds after the debt has been paid. The decision in the Tyler case shows that the Supreme Court shares this view.

Unfortunately, the Legislature’s Tax Committee voted to table the bill on May 30, making its passage unlikely by the end of the current special session.

Why should Mainers have to wait for this unjust law to be fixed? The high court was clear that laws like Maine’s which allow for home equity theft cannot stand, and lawmakers must act accordingly. If not, as reported by the  Bangor Daily News, states could face damages in the millions in future lawsuits.

It’s time for the state and local governments to cut the cord and stop violating Mainers’ private property rights.