August 20, 2015

Fifth Amendment for sale

By Christina M. Martin Attorney

Can the government take a person’s home to pay a $133 debt without paying the homeowner a penny? A case pending before a federal district court, Coleman v. District of Columbia, asks just that question. Benjamin Coleman, an elderly veteran suffering from dementia, owned a house in Northeast Washington, D.C that he’d bought with cash two decades ago. When he failed to pay $133.88 in property taxes, the District placed a lien on his home, adding another $183.47 in penalties. The District then sold the lien to a private investment company in 2007, which added $4,999 in fees, costs, and interest onto Coleman’s debt. Under District law, Coleman could redeem title to his property (that is, keep his home) by paying the overdue taxes, including penalties, costs, and interest within six months. But Coleman couldn’t pay the price of more than $5300. Instead, with the government’s assistance, the investment company evicted Coleman and foreclosed on his house. The company turned around and sold his home for $71,000 and kept all profits for itself, a windfall of nearly $65,000 that represents the equity in the home that the Fifth Amendment says Coleman should receive. But the government in Washington, D.C., believes the Fifth Amendment doesn’t apply to Coleman.

And Coleman wasn’t alone. Of the hundreds of properties taken by the District through the tax-sale foreclosure process, about one third were for debts of less than $1000, according to a 2013 Washington Post investigation.* Coleman and other foreclosed homeowners sued the District of Columbia, claiming that the government’s transfer of their surplus equity to a third party violated the Takings Clause of the Fifth Amendment, which says that government may not take property unless it is for a public purpose and it pays just compensation. Coleman, and the other plaintiffs, are not arguing that the District couldn’t take their property to pay their overdue taxes. They are arguing that the District should have reimbursed them for the excess that it took.

Courts have repeatedly held that the Takings Clause protects property including money, homes, land, liens, and investments. In fact, the District admits that Coleman had a protected property interest in his home. But it claims that government may define the terms under which a homeowner forfeits his property and his Constitutional rights to just compensation. Because Coleman failed to pay the overdue taxes, penalties, costs, and interest in the time provided by District law, the District says the Constitution has nothing to say. But the District is wrong.

PLF filed an amicus brief in Coleman yesterday, arguing that the District may not avoid the Takings Clause just because it made a law that said it could. The Supreme Court has already rejected government attempts to “shape and define property rights” in a manner that would effectively “put an expiration date on the Takings Clause.” If the states and the federal government were allowed the final say on what constitutes a valid forfeiture of constitutional rights, then government would find it all too easy to take property—indeed, all rights—from the public.

*Blog post corrected on 8/27/2015 to reflect that hundreds (not thousands) of properties were actually “taken” by the District during the time period investigated by the Washington Post: There were over 13,000 liens sold by the District over eight years (purchased by private investors who could then make handsome profits by adding extraordinarily high attorney fees and costs as well as a generous 18% interest rate onto the underlying debt).  And there were 509 completed foreclosures on those liens from 2005 to Sept. 2013.

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