In Tyler v. Hennepin County, 598 US  (2023), the United States Supreme Court has struck down the practice occurring in at least 14 states, including Massachusetts, whereby municipalities foreclose upon and auction off properties for non-payment of real estate taxes and keep the excess proceeds.  Chief Justice Roberts writing for the unanimous Court held that retention of surplus proceeds after a tax lien sale is an unconstitutional taking of property in violation of the 5th Amendment to the United States Constitution.

Numerous states, including the Massachusetts Supreme Judicial Court had held that the keeping of the surplus proceeds was legal either because it was contained in the statute or was in the public interest.  See, Kelly v. City of Boston, 348 Mass. 385, 388 (1965); Tallage Lincoln, LLC v. Williams, 485 Mass. 449, 453 n.4, 151 N.E.3d 344, 352 n.4 (2020).

Ed Allcock of Allcock & Marcus working as co-counsel with Jeremy L. Kay, of Kay Law attempted to raise this precise constitutional issue in the case of Butkus v. Charles Silton, Inc. 95 Mass. App. Ct. 1112, n. 7 (2019), however, the Massachusetts Appeals Court declined to reach the issue because of a standing issue.

The Tyler Court leaves open the possibility of the municipality retaining the surplus only if there is some procedural due process mechanism that allows the taxpayer a mechanism to lay claim to the surplus.   I believe that there is such a procedural mechanism in the Massachusetts Act, however it has been routinely ignored and rejected by Massachusetts municipalities and Courts. There was no such mechanism in Minnesota, which is where the Tyler case originated.  In Tyler, Hennepin County sold the taxpayers home for $40,000 and retained $25,000 after satisfaction of the $15,000 in past due real estate taxes.  The Supreme Court rejected the municipalities argument that Tyler had constructively abandoned her property and hence her interest in the surplus by non-payment of the underlying taxes as illogical and circular.

Chief Justice Roberts put it bluntly:
“The taxpayer must render unto Caesar what is Caesar’s, but not more”.

In light of Tyler, I believe that the Massachusetts practice of retaining surplus proceeds on tax lien foreclosures, which has in and of itself generated a cottage industry in Massachusetts of selling the liens to private parties, is unconstitutional and has always been unconstitutional.  I firmly believe that any party that has been the subject of a tax lien foreclosure in the last several years (even those where the lien has been sold to a private party) has a claim for surplus proceeds, even if that is the subject of a case wrongly decided by a Court.  After all a taking is a taking whether accomplished by the Municipality, the State, Legislature or the Judiciary.  The sovereign is the sovereign.  It may even be the basis for a class action.

If you have any questions about tax lien foreclosure, the Tyler decision or if you have been the subject of an improper tax lien foreclosure, please contact Ed Allcock at ed@amcondolaw.com.

For a copy of the Supreme Court Ruling [click here].

Written by
Edmund Allcock

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