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SCOTUS rules government can’t take more than what’s owed from property owners. Learn what states need to do to reform their unconstitutional laws.

Massachusetts

Why It Matters

In Massachusetts:

  • 65% of homes were forcibly seized for tax debts less than the price of a 6-year-old Honda Accord.
  • On average, homeowners were forced to pay out and penalized for 15 times more than the original tax debts owed.
  • One investor collected $15 million more than the tax debts owed—more than enough to pay the full tuition of every student from Massachusetts attending Harvard.

Deborah Foss, a 67-year-old woman living on a fixed income and suffering from chronic lymphocytic leukemia and other health issues, found herself living in her car during the coldest months of the year in Massachusetts. That’s because the City of New Bedford took her home through a predatory tax foreclosure scheme known as home equity theft.

Ironically, Deborah originally purchased her home to avoid financial problems. She sold her childhood home, which she inherited upon her mother’s passing, to purchase a more affordable $168,500 two-unit home: one unit for her and her partner and one unit to rent out for additional income.

However, after unexpected but necessary repairs, her tenants failing to pay rent, and a traumatic carjacking incident, Deborah fell behind on her 2016 property taxes. On December 16, 2016, New Bedford began the process of a tax taking on her home over the $3,748 tax debt.1

The city then sold a tax lien on Deborah’s home to a private investment company, Tallage Davis, LLC, during the summer of 2018. Days after securing the lien, Tallage began the foreclosure process in land court. Deborah had no idea that this was happening. 

Nine months later, the land court mailed a notice to Deborah, informing her that a foreclosure complaint had been filed against her.

When she received the news, Deborah pleaded for a 6- to 12-month grace period to sell the property and pay the full debt, but the court rejected her request, foreclosed on the lien in September 2019, and handed absolute title and ownership of Deborah’s home to Tallage.

Deborah’s home had a tax-assessed value of $241,600, and she owed around $30,000, including taxes, interest, attorney’s fees, and court costs. However, the company made off with the roughly $210,000 in equity Deborah should have retained in the home. It went on to sell the property for $242,000 and keep all of the profits for itself. Deborah was left with nothing.

Tallage secured an eviction judgment against Deborah, and in February 2022, she was forced to leave her home. As if losing her life savings was not enough, Deborah was suddenly homeless.

Unfortunately, Deborah is not alone. Pacific Legal Foundation’s research has revealed that Massachusetts homeowners subjected to tax foreclosure lose 82% of their home equity on average—$172,000 per home.

While unpaid taxes must be paid, the Takings Clause of the US Constitution forbids the government from keeping more than what is owed. By selling the lien to Tallage and robbing Deborah of her home equity, the City of New Bedford violated the Fifth Amendment.

After being contacted by Deborah’s son, Pacific Legal Foundation joined Deborah’s fight to get the just compensation to which she is entitled. 

Rather than go to court, Tallage offered Deborah a $65,000 settlement that would require Deborah to dismiss the case against both Tallage and the government. The proposed settlement agreement would also have imposed a “gag” provision on Deborah and PLF, forbidding both from making any public or private statement about the case.

Deborah wasn’t going to sacrifice her right—or PLF’s right—to speak about the case for $65,000. She refused the deal. The court sided with Deborah and denied Tallage’s motion to enforce a settlement agreement. 

Ultimately, Deborah received an $85,000 settlement offer that paid her for a substantial amount of her lost equity. In addition, Deborah and PLF are free to speak about her case. 

PLF is also seeking to eradicate home equity theft through the legislative process. Two members of the Massachusetts House of Representatives, Jeffrey N. Roy and Tommy Vitolo, sponsored Bill H.3053 to abolish home equity theft in Massachusetts.2

Pacific Legal Foundation is a 501(c)(3) nonprofit organization. © Pacific Legal Foundation, 2022.