As Rush might have called it, even if you choose not to pay, you still have made a choice. Geraldine Tyler was 93 years old, which is pretty old, even for olds. Maybe she was no longer capable of handling her own affairs. Maybe she had no one to help her, no family or friends, and so maybe she lacked the capacity to understand or act upon what was happening around here. But that’s not the beef.
The 93-year-old left her Minneapolis condominium in 2010 after a nearby shooting and a disturbing encounter left her uneasy. But she was unable to finance both her new apartment and the property tax on her erstwhile condo, accruing $2,300 in debt.
Over the course of the next five years, the government raised that debt by over 550 percent, tacking on almost $13,000 in additional penalties, fines, and interest. And when Tyler couldn’t pay that, it seized her property, sold it for $40,000—and kept the profit.
Last month, a federal appeals court ruled that was OK.
In 2010, Tyler had the wherewithal to decide to move out of her old condo to a new home. That’s entirely her choice, although it fails to offer much of an explanation as to why she didn’t sell the old condo, or rent it out, or do something with it knowing that she owned it, property taxes would accrue and would have to be paid. That’s part of the bundle of burdens with ownership. You may think property taxes are an evil, but they nonetheless exist and come due. That part is undeniable.
But to contend that they “seized her property, sold it for $40,000—and kept the profit,” is revealed by the Eighth Circuit’s decision as slightly less than accurate.
Property owners who owe outstanding taxes receive multiple notices of both the delinquent tax list and the action. Id. §§ 279.06, 279.09, 279.091. If no answer is filed, the district court administrator “shall enter judgment” against the property. Id. § 279.16.
The county auditor, on behalf of the State, then purchases each parcel associated with an unsatisfied judgment for an amount equal to the delinquent taxes, penalties, costs, and interest owed on each parcel. Id. § 280.01. This transaction occurs at a judgment sale; the title vests in the State “subject only to the rights of redemption” allowed by statute. Id. § 280.41.
In most states, a property with delinquent taxes is put up for public auction. Someone buying the property gets it free and clear of all liens. If there’s a mortgage, the bank may buy it to protects its interest. If not, then perhaps a speculator will buy it. The homeowner, of course, can buy it back, but if they had the ability to do so, they likely wouldn’t have lost it to a tax lien in the first place. And if she had the ability to sell it to pay off the tax lien, she would have done so herself, as that would be the way to recapture equity in the property.
But under Minnesota law, the county auditor buys the property for the amount of the lien rather than offering it for public sale, which might produce a profit, the amount of equity over and above the lien. It’s a harsh law, but it’s not as if it doesn’t provide safety valves for the homeowner.
During the statutory redemption period—which is three years for most properties—the former owner may redeem the property for the amount of delinquent taxes, penalties, costs, and interest. Id. §§ 281.01, 281.02, and 281.17. The county must notify the delinquent taxpayer of her right to redeem through multiple channels, including personal service. Id. § 281.23. A former property owner who wants to redeem but cannot afford to do so may make a “confession of judgment.” Id. § 279.37. A former owner who makes a confession of judgment agrees to entry of judgment for all delinquent taxes, and the State consolidates her tax delinquency into a single obligation to be paid in installments over five to ten years.
At any of these points, the homeowner has choices to make that will enable her to redeem the property upon which she failed to pay taxes, failed to sell, failed to rent, and left essentially neglected over a period of years.
Only after the final forfeiture had occurred did Tyler figure out it was time to do something about this property, and so instead of availing herself of the possibilities that she, as a homeowner, had at the outset, or she as a delinquent property tax payer had during the process, she then sued. That came after the entirety of the process was over and the state sold the property publicly for $40,000, thus creating a theoretical $25,000 profit that the state kept.
When Tyler stopped paying her property taxes in 2010, Hennepin County followed Minnesota’s tax-forfeiture scheme to collect her delinquent tax debt of $15,000. Tyler received notice of the foreclosure action and failed to respond. In April 2012, the county obtained a judgment against Tyler’s condominium. Tyler then received notice of her right to redeem, but she did not exercise her right to redeem or confess judgment during the three-year redemption period. The State took absolute title to Tyler’s condominium in July 2015, and thereby cancelled Tyler’s $15,000 tax debt. Tyler did not apply to repurchase the condominium. The county then sold the property to a private party in November 2016 for $40,000. The county distributed the net proceeds pursuant to Minn. Stat. § 282.08.
It’s hard not to be sympathetic to the plight of a 93-year-old woman. It’s also hard to be sympathetic toward the State of Minnesota, which not only enjoyed the excessive interest and penalties on delinquent taxes, but got a free and easy profit on its backend sale of the property. Would it have killed the state to turn the profit back to the property’s owner? Why should the state enjoy a windfall at the expense of Geraldine Tyler?
Then again, harsh law being harsh, it’s not as if Tyler didn’t have many choices to make along the way that would have ameliorated this harsh outcome, and she did nothing to prevent it until after it was too late. She made a choice. It just wasn’t a wise choice.
“She made a choice..”
Then that afternoon she couldn’t remember what choice she’d made.
The next day she couldn’t remember even having a choice..
They could have sent someone around to discuss what she would like to do with it, but, I’m unsurprised at what happened.
Had the issue here been her mental capacity rather than the state’s “theft” of her profit, this would be a different post.
The law makes sense in the case of an abandoned property for which the delinquent owners can’t be located. Governments don’t make themselves responsible for pro-active at being fair in cases like the one describes because of course they don’t.
How many times should a government have to notify a homeowner who is readily located of their taxes, debt, lien, and each step of the process plus post sale redemption, in order to be fair?
The number of times prior to an article being written plus one.
How is this different from a civil lawsuit where the defendant refuses to pay judgment; lawyer for plaintiff seizes defendant property; sells property to satisfy judgement…. The plaintiff isn’t allowed to keep anything over and above the judgement… why does the government?
The opinion explains the process that produces this result very clearly. If you can’t understand it, I can’t help you.
“Why does the government?”
Why does a dog lick its balls? Because it can.
The law is written that way because we all pretty much exist as ATMs for the government (see the fine structures in places like Ferguson Mo, for example). Whether the law is fair or not isn’t up for discussion.
Because tax liens are governed by different statutes, different procedures and rights govern.
The opinion covers the governing statute and procedures.
The issue before the appeals court was whether the tax lien statutes operate as an unconstitutional taking because they retain the surplus. And the appeals court affirmed they did not because Supreme Court had already “held that ‘nothing in the Federal Constitution prevents’ the government from retaining the surplus “where the record shows adequate steps were taken to notify the owners of the charges due and the foreclosure proceedings.” (*7)
So, this is different because the law says it’s different and the courts are fine with that.
Thanks. In fairness (to me) the link was not working earlier but was corrected; I realize that’s not pertinent to the issue being discussed.
I did read the link. Your post helped clarify it for me ; I appreciate it. However I think it stinks!!
$40K seems ridiculously low for any condo, let alone one with a property tax bill of $2300. Seems like the actual value of the property would be a relevant detail, along with confirming that she didn’t have a mortgage. Presumably she paid cash in 1999 or had paid it off, because it’s hard to not pay property taxes with a mortgage and the bank didn’t take the condo first when she walked away. The bank wouldn’t share any proceeds above the delinquent amount either. Condo association fees are usually more than taxes, and no mention of whether those went unpaid for five years which presumably would rope the association into this. Side issues, but it all speaks to the unreported mystery here. Did she pay all but the tax bill, or just walk away outright (from a lot more than $25K), and someone else saw an opportunity to make a case out of it?
But the broad strokes sound like a dog bites old lady story. Pretty sneaky how the story asserts she “couldn’t” pay despite no action or statement from her that backs this up, tries to make it sound predatory that a tax bill would grow by 550 percent over (checks notes) five additional years, and characterizes something as old as the hills as “shocking” and “very bad for property rights.” Is Reason running articles from Slate now?
Reason magazine is libertarian fear porn.
Need a puppy room from the scary liberatarians?
This is one of those “It may be legal but it ain’t right” situations. I wonder if she is even still alive. It’s sad there apparently wasn’t anyone to help her.
My Mom is 94 and moving, let alone trying to deal with taxes and everything else, would overwhelm her. If she had no one to help, I can see her doing nothing Mrs. Tyler. If I didn’t handle her bills and banking, I could see all kinds of issues happening.
When Michigan’s supreme court looked at a somewhat similar tax collection process, it came up with a different answer and required the so-called “surplus proceeds” remitted to the tax debtor. Rafaeli v Oakland County Treasurer, 505 Mich 429 (2020). The 6th Circuit in Freed v Thomas, No, 18-312 (2020) held on a similar complaint, dismissed by the ED Mich court on standing and some other procedural grounds, that there was a justiciable federal claim under the 5th Amendment’s takings clause.
From this case: “Where state law recognizes no property interest in surplus proceeds from a tax-foreclosure sale conducted after adequate notice to the owner, there is no unconstitutional taking.” (*6 to *7).
Rafaeli had different state law: “[D]efendants’ retention and subsequent transfer of those proceeds into the county general fund amounted to a taking of plaintiffs’ properties under Article 10, § 2 of our 1963 Constitution.”
Maybe amend the statute to require APS involvement or a protective proceeding if the foreclosee is above a certain age.
This would be another worthless AARP benefit.
I understand the concern of some of the commenters for Tyler’s mental capacity, but as she was represented by counsel through these proceedings, surely the issue would have been raised had they thought it applied.
Yeah, it seems wrong that they kept the excess proceeds. I’d think she’d have a property interest in, well, the property, which would result in a property interest in the proceeds of its sale–but I am not the Supreme Court, so my opinion doesn’t matter a whole lot. But it’s hard to feel much sympathy for her when she completely ignored the matter for several years.
I’ve represented many folks in similar situations. There’s a huge tendency to “ostrich” and I see it all the time. These are apparently-normal people but the conversations go something like this:
THEM: I need you to fix my house; I think something is wrong
ME: Hmm. [checks records.] I see your house was sold at auction last Thursday. That is not good news at all, but may be recoverable. Did you know this was happening?
THEM: I don’t know. Maybe? [dumps a pile of certified letters on desk] They kept on mailing me but I didn’t have the money they wanted, and I figured they were just asking for more. I don’t always pick them up and I can’t stand to read them.
ME: [Opens most recent letter; sees advance notice of sale.] I have some bad news, here…
People get terrified and then they stall, to their great cost. I have even had some clients who refused to sell to AVOID foreclosure–even though they desperately needed money; even though they would have had a five-figure profit if they sold; and even though the profit would disappear w/ the lower auction price plus auction fees.
But although it is common, it does not necessarily lead to any mental-capacity claim (or at least not one with a reasonable chance of success)