Last year, Deborah Foss was forced to live in her car during the coldest months of the year after New Bedford officials placed a tax lien on her home and sold it to a private company called Tallage for $9,626 — the total amount she owed, including interest. The tax lien gave the investor authority under Massachusetts law to take her home, sell it for $241,600 and keep all the profits. Deborah lost her home and her value in it over a debt that was worth just a fraction of the value of her home.
And that’s just the tip of the iceberg. From 2014 through 2021, Massachusetts homeowners subjected to tax foreclosure lost 82% of their home equity on average — $172,000 per home. Massachusetts is one of 12 states, plus the District of Columbia, regularly using these abusive and unconstitutional “tax and take” seizures. A recent study by my firm, Pacific Legal Foundation, details how these predatory home equity theft laws work, and the windfall government and private investors have taken at the expense of people like Deborah.
In Deborah’s case, PLF provided her with legal representation to defend her constitutional rights, which ended in a settlement that allowed her to get back on her feet. But other property owners continue to lose everything under state law.
It doesn’t have to be this way.
In most states, tax foreclosures are treated just like other debts. If you fail to pay your property taxes, the government (or partnering investors) can seize and sell your property to satisfy the debt. But once your debts are paid, the remaining proceeds must be returned to you.
But that’s not how it works in Massachusetts. Here, cities and towns can keep and foreclose on tax liens or sell them to investors. The lienholder (whether government or investor) may file for foreclosure once the debt is six months old. After foreclosure, the lienholder gets a deed to the property and can do whatever it wants with it, including selling it and keeping any profits from the sale. The original owners are left with nothing, regardless of how much equity they might have built up in the property over the years.
The victims of these seizures are often vulnerable people like Deborah Foss, people who are least equipped to fight back: working families, single parents, seniors on a fixed income, and people experiencing job loss, health difficulties, mental health challenges, or cognitive decline. Deborah is a senior citizen suffering from chronic lymphocytic leukemia and other health issues.
The injustice of home equity theft is obvious. But beyond the essential unfairness, we should recognize that these predatory forfeitures violate important property rights protections under the Constitution. The Takings Clause of the Fifth Amendment requires the government to provide “just compensation” to the owner whenever it takes private property for public use. And the Eighth Amendment’s Excessive Fines Clause prevents the government from imposing excessive financial punishments. Taking a huge windfall at the expense of someone like Deborah violates these protections.
Fortunately, the tide is shifting. In recent years, four states changed their tax foreclosure laws to better protect property owners, often in response to mounting public and media pressure. And two bills filed by state Reps. Jeffrey Roy and Tommy Vitolo, and state Sens. Jo Comerford and Mark Montigny, could do the same thing in Massachusetts.
PLF has already secured a state Supreme Court victory to end home equity theft in Michigan, and we are representing an elderly homeowner in Minnesota in a case challenging home equity theft at the U.S. Supreme Court. If we win, the practice could become a thing of the past. But Massachusetts officials shouldn’t need the Supreme Court to tell them that stealing a person’s entire home over a much smaller tax debt is wrong.
Of course, if you fail to pay your property taxes, you’ll likely face consequences like penalties or interest. In the most serious cases, individuals will lose their property in foreclosures. But the government should never take more than it is owed.
This op-ed was originally published in the Telegram & Gazette on March 19, 2023.