Active: Lawsuit challenges state’s unconstitutional tax foreclosure system

Self-sufficiency and independence have always been a way of life for Lynette Johnson. She was born and raised in Guyana, where her parents produced rice and pigs for sale in local markets, along with fried fish, breads, cakes, and ginger beer (with crushed ice). When she was older, Lynette established a livelihood of her own, buying goods from different countries to sell in her home country.

In 1993, Lynette emigrated to New Jersey, settling in with her husband to raise their family. Today, Lynette is proud that her eight children, now adults, share the family’s deep-rooted entrepreneurship and independence. Her son, Alton, and daughter, Shevon, were no exception. In 2014, the brother and sister found an ideal commercial location in East Orange, New Jersey, to run their small businesses.

Lynette was back in Guyana at the time for an extended stay with family and friends. So, while she was still abroad, Lynette bought the property for her children to share—Alton would run a deli-grocery store on one side of the building while Shevon would use the other side for her shipping business.

The property cost $55,000 and Lynette spent another $16,000 on architectural plans and permits for renovations. She never received property tax assessments and thus did not pay the first year’s property taxes.

In New Jersey, property taxes are treated as a continuous lien. If they’re not paid by the close of a fiscal year, the lien is sold at public auction for the taxes owed plus interest. Unbeknownst to the Johnsons, the city bought their tax lien at public auction in October 2015. At the time of sale, Lynette owed $4,621.98.

The Johnsons remained in the dark for the next two years, during which time the lien amount grew to nearly $20,000. In fact, they didn’t know the city foreclosed on their property in February 2018 until a month later when a family member saw police towing vehicles from the property.

Shevon rushed to the scene and was informed the property now belonged to the city. She went straight to City Hall and offered to pay the lien amount in full, only to be told it was too late. Three months later, the city sold the property to private investors for $101,000—and kept all proceeds from the sale, netting an $81,000 profit.

While the government may levy and enforce property taxes, it should not collect more than what is owed. Every penny from the sale that exceeds a tax debt represents equity, or private property, that should be returned to the owner.

The U.S. Constitution protects homeowners’ right to just compensation for property taken. Just as citizens should follow the law and pay their property taxes, government must also abide by the law and stay within its constitutional limits. State law, however, allows local governments to keep windfalls at the expense of property owners like Lynette. Lynette, represented by PLF, argues that this law is unconstitutional. According to data collected by PLF, New Jersey stole more than $140 million in total home equity from 2014 to 2020.

Represented by PLF free of charge, Lynette is fighting back in New Jersey courts to end this equity theft and stop government from reaping windfalls at the expense of property owners.

New Jersey is the latest state in PLF’s ongoing work to defeat home equity theft across the country.

What’s At Stake?

  • Government can take property to collect unpaid taxes, but taking more than it is owed is legalized home equity theft.
  • A property’s equity is private property. Delinquent property tax foreclosure neither wipes out equity nor relieves government’s obligation to pay just compensation.

Case Timeline

December 01, 2021
Complaint
New Jersey Superior Court, Essex County