U.S. Supreme Court Rules Tax Foreclosure Sale Surplus Retention Unconstitutional

The elderly are often vulnerable to punitive home foreclosures.  The United States Supreme Court has handed down a decision ruling in favor of an elderly homeowner who lost her real property to a tax foreclosure action. The homeowner, 94-year-old Geraldine Tyler, failed to pay property taxes on her condominium for several years. Hennepin County, Minnesota seized the property through tax foreclosure. The county then sold it for $40,000, reimbursed itself for the approximate $15,000 she owed, and kept the $25,000 excess. A unanimous SCOTUS court ruled that the County violated the Takings Clause of the Fifth Amendment of the United States Constitution. It declined to rule on whether it also violated the Excessive Fines Clause of the Eighth Amendment. See Geraldine Tyler v. Hennepin County, Minnesota, et al., (U.S., No. 22–166, May 25, 2023).

The Court ruled that Hennepin County had the power to sell Ms. Tyler’s home to recover unpaid property taxes, but, it could not take more than it was due. The county’s action constituted a taking in which a government directly appropriates private property for its own use. The idea that government may not take from a taxpayer more than what is due is rooted in U.S. and other legal precedents going back hundreds of years. This is also consistent with the laws of 36 U.S. states and the federal government, which require that excess value be returned to the taxpayer. Hennepin County’s position, fortunately, constitutes the minority position.

Furthermore, this action by Hennepin County harmed Ms. Tyler. Although the tax lien sale extinguished other liens, she remained personally liable for remaining unpaid mortgage debt and HOA fees. If Ms. Tyler had received the $25,000 surplus, she would have been able to satisfy other debts.

The Court considered but rejected the county’s argument that Ms. Tyler abandoned her property by failing to pay her property taxes.  The Court found that Ms. Tyler did not surrender or relinquish all rights to the property. She could have continued to use the property for several years after falling behind on the taxes until the foreclosure process was complete. A failure to contribute to her share of taxes to the government is not equivalent to abandonment sufficient to avoid complying with the Takings Clause. The court reversed the judgment of the Eight Circuit Court of Appeals is reversed.

Two SCOTUS judges also published a concurring opinion addressing Ms. Tyler’s argument that the county’s actions violated the Excessive Fines Clause of the Eighth Amendment. They cautioned that lower courts should not ignore the issue. Actions such as those of Hennepin County may be subject to claims that they violated the Eighth Amendment, where a statutory scheme partially punishes a taxpayer, regardless of whether it is somewhat or primarily remedial. Minnesota’s tax-forfeiture scheme was not solely remedial and had punitive elements. As such, the concurring Justices contend that the Eighth Circuit committed a further error when it dismissed Ms. Tyler’s Eighth Amendment claim, and warned that future courts should not follow suit.

Ohio Guardian's Sale of Medicaid Recipient's House Approved as being In Her Best Interest

A guardian can sell a Medicaid recipient's house even though the mortgage loan was in default, because the mortgage company had not foreclosed on the property and it was in the recipient's best interest to sell the property and retain her Medicaid benefits.  That is the decision of an Ohio Court of Appeals in the case of  Gasper v. Adkins (Ohio Ct. App., 10thDist., No. 17AP-294, Sept. 27, 2018).

Christopher Gasper was appointed guardian of Diantha Adkins, who was in a nursing home and receiving Medicaid benefits. Mr. Gasper petitioned the court to sell Ms. Adkins' house. The company that held the mortgage objected to the sale, claiming the mortgage loan was in default.  The company holding the mortgage argued that the guardian could not sell the property, but the guardian could only sell the ward's right to redeem the property from foreclosure.  The company that held the mortgage had not filed for foreclosure, though, so the company's argument would mean that the ward would have to continue to hold ownership of the property, which the guardian argued threatened the ward's Medicaid benefits. 

The court rejected the mortgage company's argument, found that the sale of the property was in the best interest of Ms. Adkins and authorized Mr. Gasper to execute a deed in lieu of foreclosure. The mortgage company appealed, arguing that the court couldn't authorize the sale of the property free and clear of the mortgage lien without the mortgage company's consent.

The Ohio Court of Appeals, 10th District, affirmed, ruling that the guardian was entitled to sell the property. According to the court, because the mortgage company had not foreclosed on the property, Ms. Adkins was not "divested of legal ownership" at the time Mr. Gasper sought the authority to sell her real estate. The court also held that it was in Ms. Gasper's best interest to sell the property in order to not jeopardize her Medicaid benefits.

What Are the House Ownership Options When Parents and Adult Children Live Together?

Bailey House,  Somers Hamlet Historic District
in Somers, NY, USA

Increasingly, several generations of American families are living together. According to a Pew Research Center analysis of U.S. Census data, more than 50 million Americans, or almost 17 percent of the population, live in households containing two adult generations. These multi-generational living arrangements present legal and financial challenges around home ownership.

Multi-generational households may include "boomerang" children who return home after college or other forays out into the world, middle-aged children who have lost jobs in the recent recession, or seniors who no longer can or want to live alone. In many, if not most, cases when mom moves in with daughter and son-in-law or daughter and son-in-law move in with mom, everything works out well for all concerned. But it's important that everyone, including siblings living elsewhere, find answers to questions like these:

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New Rules Make It More Difficult to Get a Reverse Mortgage

The federal government has tightened the rules regarding reverse mortgages, making it harder for some seniors to get these types of mortgages and reducing the amount of their home’s value that they can tap. The new rules are an effort to strengthen the federal Home Equity Conversion Mortgage (HECM) program, which insures almost all reverse mortgages and which has seen default rates rise.

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