Maine
How It Works
Maine cities and towns typically place tax liens on delinquent properties. A lien automatically forecloses after 18 months, conveying full title to the municipality.
There are a few exceptions. First, the law sometimes requires municipalities to refund surplus proceeds to seniors who owned homestead property. Second, municipalities may opt for alternative statutory methods to collect delinquent tax debts, including seizing personal property. State law also allows municipalities to adopt an ordinance that reserves surplus funds for former owner.
The Impact
Homeowners caught up in this process lose, on average, 88% of their equity. For the 43 homes in our dataset, homeowners lost a total of $4 million in equity.
Why It Matters
In Maine:
- 65% of homes were forcibly seized for tax debts less than the price of a 10-year-old Ford F-150.
- On average, homeowners lost $167,000 in savings beyond the debt owed—or three years’ worth of income.
- Governments were able to keep $2 million more than what was owed to them.
Lesley Harris and her husband owned and lived in a home in Auburn, Maine. Lesley spent the last years of her husband’s life caring for him as he suffered from severe diabetes. His disease and passing caused Lesley financial stress. Take care of her sick mother in California only added to it.
To deal with the financial hardships, she tried to sell her home but was unsuccessful, even getting an offer for $100,000 that fell through. Retaining the home, Lesley accumulated $32,000 in property tax debt owed to the City of Auburn. Although she made payments where she could, she was ultimately unable to stay on top of the debt.
In Maine, local governments are authorized to foreclose and sell tax-delinquent properties when the redemption period expires, which happens 18 months after the government files a tax lien. Most U.S. states have similar laws. However, some U.S. states, including Maine, allow the government to keep the surplus proceeds from tax foreclosure sales beyond the amount of taxes owed.
Empowered by this “home equity theft” law, the Auburn government seized Lesley’s home and sold it for $47,000. It did not return the $15,000 surplus to her. The property was likely worth much more than the $47,000 it generated at tax sale. The tax-sale purchaser subsequently sold the property, without improvement, for $130,000.
Maine has a homestead exemption law that allows homestead owners aged 65 and older to claim the surplus from tax sales if they reside in Maine full time, but Lesley did not qualify.1 Research by Pacific Legal Foundation found that from 2014 to 2021, approximately 43 Maine homeowners were victims of home equity theft. On average, homeowners lost $167,000, or 88%, of their home equity.
Thankfully, Lesley’s neighbors and friends were looking out for her. Her neighbors, John and Gayle Crowley, purchased Lesley’s foreclosed home and then reached out to Pacific Legal Foundation. Concerned about the injustice and sympathetic to Lesley’s situation, they could not understand how the government could sell Lesley’s home and not return the surplus to her.
While governments are entitled to sell homes to recoup delinquent taxes, taking more than they are owed is theft. After tax debts have been repaid, the government should return the surplus to the original owners, regardless of their age or how much of the year they live at the property.
The U.S. Constitution protects homeowners’ rights to just compensation for seized properties and freedom from excessive fines. These laws require Maine localities to return to homeowners the difference between what they owed and what the government took.
Resources
Statement of Principles on Ending Home Equity Theft
Download Data
Maine should end the practice of home equity theft
Legal Appendix Download
State Summaries Download
Maine Home Equity Theft Laws
Does the law commonly protect owners’ equity?
- Analysis
-
No. Typically, municipalities in Maine place a tax lien on the delinquent property, which automatically forecloses after 18 months and vests full title in the government. Municipalities are authorized, but not required, to adopt an ordinance that surplus proceeds from the sale of tax-foreclosed properties are to be disbursed to the former owner.
- Citation
-
Me. Stat. tit. 36, §§ 942, 943, 949.
Are there any exceptions to that rule?
- Analysis
-
Yes. First, where the property automatically foreclosed by the tax lien procedure is a homestead owned by senior citizens, the law requires that surplus proceeds from the sale of that property be refunded to the former owners. Additionally, the law provides that personal property may be seized and sold to pay real property tax debts. If a municipality chooses to use this procedure, it not only avoids the forfeiture of real property but also requires that any surplus proceeds from the sale of personal property be refunded to the taxpayer.
- Citation
-
Me. Stat. tit. 36, §§ 943-C, 991, 992.
Does the government sell tax liens, or does it sell property outright, and what procedures does it use for the sale?
- Analysis
-
Typically, the government retains the tax lien and sells the property outright after foreclosure. However, post-foreclosure sales are not required, and except in the case of homestead property owned by senior citizens, they are not subject to any special rules.
A variety of alternative procedures are also available. These include civil actions for a writ of attachment and distraint and sale of personal property, both of which are somewhat more protective of equity than the typical automatic tax lien procedure. The government may also sell the property outright at a tax auction sale. While this older method does not protect equity, it does provide more generous redemption provisions; however, because it is less profitable for the government and riskier for investors, it is rarely used.
- Citation
-
Me. Stat. tit. 36, §§ 942, 943, 941, 991, 992, 1071; see Martel v. Bearce, 311 A.2d 540, 547 n.10 (Me. 1973).
What interest and penalties accrue for delinquent taxes, and who collects them?
- Analysis
-
Municipalities are authorized to adopt their own interest rates, with a maximum set at the prime interest rate (as published in the Wall Street Journal on the first business day of the calendar year) plus three percentage points and rounded up to the nearest whole.
- Citation
- Me. Stat. tit. 36, § 505(4).
What is the redemption period—the length of time to pay the debt prior to permanently losing title?
- Analysis
-
Redemption of a tax lien may be made within 18 months of the creation of the lien, after which it is automatically foreclosed.
- Citation
-
Me. Stat. tit. 36, § 943.
If equity is stolen, who profits?
- Analysis
-
The municipal government.
- Citation
-
Me. Stat. tit. 36, §§ 943, 949, 943-C.
How much time does the previous owner have to claim the surplus proceeds, and what are the procedures for claiming them?
- Analysis
-
In the case of homesteaded property owned by eligible senior citizens, the law places an affirmative duty on the government to return the surplus proceeds.
- Citation
-
Me. Stat. tit. 36, § 943-C.
What types of foreclosures are used in the state?
- Analysis
-
Automatic.
- Citation
-
Me. Stat. tit. 36, § 943.
What types of notice does the state require?
- Analysis
-
(1) Notice prior to the creation of a tax lien, and (2) notice prior to the expiration of the redemption period.
- Citation
-
Me. Stat. tit. 36, §§ 942, 943.
1 36 ME Rev Stat § 946-A(2020); 36 ME Rev Stat § 681(2021).