Victory for New Jersey woman in home equity theft case
The government stole from Lynette Johnson, a Guyanese immigrant in New Jersey, when it foreclosed on her property, sold it, and pocketed the difference between her property’s selling price ($101,000) and her property tax debt (about $24,000).
Finally, last week—after four years of Pacific Legal Foundation fighting for Lynette in court, and more than two years after PLF won a landmark decision in a similar case at the Supreme Court—a New Jersey appellate court has ruled in Lynette’s favor. The decision applies the hard-won precedent in Tyler v. Hennepin County to affirm what people’s rights are when the government steals from them.
What happened to Lynette is called home equity theft. That’s when the government takes property in a tax foreclosure but doesn’t return surplus value to the owner. The particular facts of her case are infuriating: The City of East Orange, New Jersey, sent property tax bills to Lynette’s unoccupied, burned-out commercial property (which didn’t even have a mailbox) instead of her home address in nearby Newark—even though Lynette specified in forms to the City that the Newark address was her correct mailing address.
Lynette bought the commercial property in 2014; she planned to renovate it for her adult children to use for a business. But after she retained an architect, she was forced to put the project on hold while she cared for her terminally ill husband. She never received the 2015 property tax bills for her commercial property; the mail was returned to the City undeliverable.
The City didn’t inform Lynette of the tax lien on the property when she applied for a construction permit in October 2015. She didn’t find out about the debt until 2018, after the City foreclosed on her property. The total tax debt on her property at that point was $24,686.59. Her children tried to pay it but were told it was too late. (The City claims the debt was actually over $50,000, including $10,000 in “vacant property registration fees.”)
PLF helped Lynette sue in 2021. But the trial court ruled that Lynette brought her takings claim against the government too late. She “slept on her rights,” the trial court said.
The appellate court disagreed with the trial court. In last week’s ruling, it held:
Here, the taking did not occur, and plaintiff’s claim did not accrue, until the City obtained a final judgment of foreclosure and failed to return the surplus equity. Thus, it would be illogical to suggest plaintiff could have brought her takings claim before the taking occurred. [. . .] We conclude plaintiff’s takings claim was neither stale nor untimely.
The court also acknowledged that the Tyler precedent applies retroactively to cases like Lynnette’s. The case will now be remanded to decide how much equity Lynette is owed—unless it’s appealed to the state supreme court.
It’s worth noting how much the government dragged its feet before awarding Lynette this victory. In 2022, the City tried to transfer Lynette’s case to another division of the same court. The court sat on the request for 10 months, essentially freezing the case. PLF filed a motion for summary judgment on April 25, 2023 (the day before oral arguments at the Supreme Court in Tyler). The Tyler decision came out on May 25. The trial court scheduled a status conference for a month later and asked for a supplemental briefing to address Tyler. Then it scheduled another status conference in July, asked for more briefing, scheduled another status conference in December, and finally decided in March 2024—inexplicably ruling against Lynette.
Last week’s appellate court decision finally vindicates Lynette’s rights—although litigation will continue before she finally wins back what the government owes her.
It’s also another milestone in PLF’s years-long campaign to end home equity theft nationwide. Home equity theft was common around the country before PLF attorneys began representing victims in lawsuits against the government. In the two years since winning Tyler, PLF has continued to represent home equity theft victims in court while working with state legislators to ban home equity theft in all 50 states.
Read the court’s decision in Lynette Johnson v. City of East Orange.
