Donors Helped Take Winning Fight Against Home Equity Theft to U.S. Supreme Court 

At first glance, 94-year-old Geraldine Tyler may seem like any other elderly grandmother. She loves her family and enjoys playing Bingo with her friends. But, unlike most seniors, she won a lawsuit this week at the U.S. Supreme Court that will likely save thousands of people from a predatory tax scheme known as home equity theft.    

Tyler’s story began in 2010 when she moved out of her Minneapolis home and into an apartment for seniors. She kept her former home, but soon after fell behind on property taxes. Four years later, Hennepin County foreclosed to collect approximately $2,300 in property taxes, plus around $12,700 in penalties, interest and costs.   

But rather than just liquidate the property and take what was owed, the County took absolute title to Tyler’s home, which was worth much more than her $15,000 debt. The County later sold the property at auction for $40,000 and kept every penny of the $25,000 windfall, leaving Tyler with nothing. Incredibly, Minnesota law authorized this confiscation.  

Most Americans would never think they could lose their home and all their savings in it for failing to pay a few years’ worth of property taxes. But home equity theft is shockingly common. Twelve states plus the District of Columbia regularly allow the practice. And several more states allow it when the government wants the property for a particular public use like a park or for affordable housing. A study by Pacific Legal Foundation (PLF) found that between 2014 and 2021, more than 8,950 homes were confiscated, which amounted to more than $860 million in stolen home equity.   

The individual stories are often more shocking than the raw numbers. Take, for example, PLF client Uri Rafaeli. When he was in his eighties, Michigan County took his rental home when he accidentally underpaid the property taxes by only $8. The government sold it at auction for $24,5000 and kept every penny. And PLF client Erica Perez only owed $144 in property taxes, plus a few hundred dollars more in penalties, interest and fees when the government took her property and sold it at auction for $108,000. 

For many years, most people who lost property this way were forgotten by society. Most are like Tyler, elderly and living on a small, fixed income — unable to afford lawyers. They do not have publicists and are usually not politically connected. For many years, people like Tyler lost everything with no recourse.   

But beginning in 2017, PLF started taking on these property rights cases. Powered by generous donors, PLF was able to bring property rights expertise to the fight, offering free representation to people robbed by their own government. PLF’s first big win happened in 2020, when the Michigan Supreme Court held that the local government violated the Michigan Constitution when it took more than what was owed.   

Last year, the Sixth Circuit ruled in favor of another PLF client, Tawanda Hall, holding that the Constitution requires just compensation when the government takes homes worth more than what is owed.   

But last year the Eighth Circuit reached the exact opposite conclusion, denying Tyler’s constitutional claims, holding that Minnesotans had no protection from such confiscation unless the state legislature said so. Around the same time, the Nebraska Supreme Court denied two similar constitutional challenges brought on behalf of two seniors. PLF filed petitions for all three seniors within just a few weeks of each other.  

Fortunately, the Supreme Court granted Tyler’s petition and has placed the other two on hold. Last month, the court heard oral argument in her case and last week the Court issued a unanimous decision in favor of Tyler.  All nine Justices agreed with PLF that the government cannot take more than it is owed when settling tax debt. The decision could force every state to fix its laws to protect private property. And perhaps equally important, the media attention brought by the Supreme Court’s decision shines a spotlight on the issue. States that previously resisted efforts to fix their laws are now giving hearings to bills that would prevent home equity theft.   

None of this would have been possible without the support of donors who decided to fund the fight to end home equity theft.  

Christina Martin is a senior attorney at Pacific Legal Foundation, a nonprofit legal organization that has defended Americans’ liberties when threatened by government overreach and abuse for the last 50 years. PLF represented Geraldine Tyler free of charge.  

To learn more about how the Philanthropy Roundtable community is promoting America’s founding principles through its support of public interest litigation, contact Program Director Clarice Smith.