In the last few years, states have started to end home equity theft. Such reforms have consistently attracted support from a variety of groups across the ideological and political spectrum. For example, a 2021 bill in North Dakota passed unanimously. And when the Supreme Court heard a case challenging home equity theft in Minnesota, 26 amicus briefs on behalf of a wide array of groups, including AARP, the ACLU, AFP, Cato, Public Citizen, the National Association of Realtors, and the U.S. Chamber of Commerce, called for the Court to hold that the practice was unconstitutional. On May 25, 2023, the Supreme Court unanimously held that the government violates the Constitution when it takes home equity without compensation. Now, it is up to the states to fix their laws to comply with the Constitution and basic fairness. One model bill can be found here.
Timeline
Pacific Legal Foundation is working in courthouses and statehouses across the country to end this egregious practice.
United States
The Supreme Court held that home equity theft violates the Fifth Amendment
Massachusetts
In 2024, Massachusetts created a system for property owners to claim excess equity, providing a straightforward process and a reasonable amount of time for owners to claim surplus equity after foreclosure.
New York
In 2024, New York created a system for property owners to claim excess equity. While this ends equity theft in theory, the onus is on the property owner to demand compensation from the government. In the future, New York should amend its laws to make compensation to property owners automatic—the same as when the government takes property through eminent domain.
New Jersey
In 2024, New Jersey created a process for property owners to claim excess equity. However, the default is that the owner will not receive compensation and they have a small window of time to request a sale so they can claim their excess equity. In the future, New Jersey should amend its laws to make compensation to property owners automatic.
Minnesota
In May 2023, the US Supreme Court sided with Hennepin County, Minnesota, grandmother Geraldine Tyler and declared the state’s property tax forfeiture scheme unconstitutional. One year later, the legislature passed a comprehensive reform that ended home equity theft, as part of the omnibus tax bill, HF 5247. The reform includes improved notice procedures, implements competitive auctions of forfeited property, and requires the government to proactively protect any surplus and notify former owners of the opportunity to claim it
Colorado
Colorado enacted a sweeping equity protection bill in 2024, requiring all tax foreclosed properties to be sold at auction, with robust notice to property owners and a straightforward process for property owners to claim surplus equity after a tax sale.
Alabama
In 2024, Alabama created a system for property owners to claim excess equity. While this ends equity theft in theory, the onus is on the property owner to demand compensation from the government. In the future, Arizona should amend its laws to make compensation to property owners automatic—the same as when the government takes property through eminent domain.
Arizona
In 2024, Arizona created a system for property owners to claim excess equity. While this ends equity theft in theory, the onus is on the property owner to demand compensation from the government. In the future, Arizona should amend its laws to make compensation to property owners automatic—the same as when the government takes property through eminent domain.
Oregon
In the 2024 short session, Oregon enacted a temporary moratorium on home equity theft and directed counties and the Department of Revenue to recommend permanent reforms in the 2025 regular session.
Wisconsin
In 2022, the Wisconsin legislature overwhelmingly passed Senate Bill 829, which ended most equity theft in the state. The bipartisan bill was championed by the Wisconsin Realtors Association and Pacific Legal Foundation.
Since then, former owners were entitled to the surplus proceeds following a sale of tax-deeded property at auction. However, the law contained a potential loophole because it did not expressly require the government to sell tax-deeded property. Rather, surplus proceeds were due to the former owner only if it decided to sell the property. Otherwise, the government could use the property for any purpose without providing just compensation to the former owner. In 2024, WRA and PLF again teamed up to pass Assembly Bill 969, which closed the loophole.
Idaho
In March 2024, Idaho passed H444, which closes a loophole that allowed governments to foreclose on properties and keep them for public use without paying compensation. Now, all tax foreclosed properties will be sold and surplus equity returned to property owners.
South Dakota
Maine
In 2023, the Maine legislature passed LD 101, ending home equity theft by allowing owners to demand that tax foreclosed properties be sold by a real estate broker and ensuring that excess equity is returned to the former owner. The same protections had long been applied to homestead properties owned by seniors; now all Mainers enjoy those protections. In light of the U.S. Supreme Court’s decision in Tyler v. Hennepin County, Maine also formed a working group of tax collectors and real estate, legal, and financial professionals to study due process and takings issues in the tax foreclosure process and suggest further improvements to Maine’s laws.
Nebraska
In 2023, the Nebraska legislature passed LB 727 that was amended to end equity theft in the state by requiring property tax foreclosures to go through an existing judicial foreclosure proceeding to collect the tax debt, pay liens, and protect the debtor’s equity. The law came as the U.S. Supreme Court sent two cases back to the Nebraska Supreme Court, instructing it to reconsider the cases in light of the U.S. Supreme Court’s decision in Tyler v. Hennepin County. The bill was championed by the Platte Institute, Legal Aid of Nebraska, the American Civil Liberties Union (ACLU) of Nebraska, and Pacific Legal Foundation (PLF).
North Dakota
In 2021, the North Dakota legislature unanimously passed House Bill 1199, which ended all equity theft in the state.2 The legislation followed a PLF report documenting the size of the problem and sharing the story of Drayton resident Kevin Juhl.3
In December 2018, Kevin was on a job hauling freight across the country when his wife called him, sobbing. The words she got out as she choked back her tears left him stunned: Pembina County had taken title to their home for unpaid taxes and was preparing to sell it at auction.
Fortunately for the Juhls, an attorney and their local state representative helped convince the county to reverse course and allow the Juhls to regain their property by paying their original debts.
Thankfully, the state legislature decided to do the right thing and protect equity rights for all North Dakota property owners.
Michigan
In 2020, the Michigan Supreme Court struck down the state’s home equity theft scheme.4 Here’s how we got there.
When Uri Rafaeli accidentally underpaid his property taxes by $8.41 in 2011, he never imagined what that small mistake could mean for his future—or the future of other property owners in his state. To collect that $8, plus $278 in interest, penalties, and fees, Oakland County took his house in Southfield, Michigan, sold it at auction for $24,500, and kept every penny.5 Uri lost his home and tens of thousands of dollars in equity—for the price of one Chipotle burrito.
Incredibly, Uri was not alone in facing this kind of injustice. Across Michigan, thousands of property owners lost everything because of Michigan’s aggressive tax-and-take system. From 2007 through 2021, Michigan counties foreclosed on nearly 290,000 properties for delinquent taxes—one property for every 35 state residents.6 When each property was sold at auction, the government kept all the profits, no matter how small the debt or how valuable the property, resulting in windfalls for counties around the state.
Fortunately, Uri fought back. With Pacific Legal Foundation’s help, he took his case to the Michigan Supreme Court, which in 2020 held that Oakland County had violated the constitutional mandate that government must pay just compensation when it takes private property for a public use. By keeping all the proceeds from the sale, the county had violated Michigan’s constitution.7
Uri did far more than get his house back: he secured the rights of every property owner in his state.
Montana
In 2019, the Montana legislature overwhelmingly passed Senate Bill 253. The bill protects certain classes of property from equity theft, including residential, agricultural, and forest property.8 Montana can do more by expanding those protections to encompass all real property.