The John Adams Courthouse in Boston houses the state Supreme Judicial Court, one of the governmental bodies that could end equity theft in Massachusetts, according to advocates. (Staff Photo by Nicolaus Czarnecki)
Ever since the Supreme Court ruled last May that a municipality in Minnesota had violated the Constitution’s takings clause when it sold a foreclosed property and kept proceeds in excess of what the property owner owed in taxes, Massachusetts residents have waited for this state to end that problematic practice.
Homeowners here still face the prospect of losing all the value they’ve accumulated over the years due to a confiscatory state statute known as absolute title, according to advocates and lawyers working to have that dubious practice stopped immediately.
Massachusetts remains one of only a handful of states that presently allows local governments to take not only the taxes they’re owed – plus interest and fees – but also the rest of a property’s equity.
In some instances, municipalities take over properties worth several thousand dollars, even if the tax amount owed is just a fraction of what the home is worth.
Attorney Chris Perry previously told the Boston Herald the Supreme Court decision provided a constitutional right, “and to realize the ability to obtain that right, no action needs to be taken. Despite that, he said nothing had changed.”
Perry said this injustice could be remedied by removing now unconstitutional language regarding “absolute title” from the Land Court’s website.
The Land Court issued a statement last August indicating an “absolute title” foreclosure is not, in itself, prohibited by the Supreme Court’s decision, but it does prohibit the keeping of proceeds beyond what’s owed.
A court spokesperson told the Herald the website had been updated to include information “about a taxpayer’s right to claim any excess proceeds from the plaintiff after a foreclosure has occurred.”
That appeared to contradict Perry’s contention that the high court’s decision provided a constitutional right that requires no action to be taken by the property owner.
Frank Bailey, a retired federal bankruptcy judge in Massachusetts who now leads the Pioneer Public Interest Law Center, told the Herald he’d seen property owners moving through the Land Court toward the risk of losing the equity in their homes.
“There are still motions to foreclose on the right of people to redeem their property,” he said. “It’s happening every week.”
Bailey said he wasn’t surprised no new law has been passed to bring the state’s foreclosure process into compliance with the Tyler decision. Lawmakers are reluctant to relinquish a funding source for the cities and towns they represent.
“People need to pay their taxes,” the former judge said. “(Municipalities) can take the properties, they can sell them, but give the equity to the homeowner. Usually it wasn’t their fault they fell behind. It’s their equity, their life savings.”
However, a recent court ruling may provide a judicial route to ending this home-equity theft overreach, or at least shame lawmakers into legislating it out of existence.
According to the Boston Globe, a Massachusetts court for the first time has ruled that the way some municipalities pursue tax-taking cases against homeowners is unconstitutional.
Last week, Judge Michael K. Callan of Hampden Superior Court cited last year’s Supreme Court decision in barring the City of Springfield from taking about $123,000 in equity from local homeowner Ashley M. Mills.
That ruling, while striking down the Minnesota law, said existing laws in other states may be constitutional if they provide a process for property owners to recover their equity.
However, Callan in his ruling said the state law used by municipalities in tax-taking, known as Chapter 60, does not provide a recovery process and therefore is “unconstitutional as applied in circumstances, such as here, where the tax debt is less than the value of the property.”
Chapter 60 “in its present form, is untenable and requires legislative correction,” Callan wrote in his 19-page ruling.
Mills received legal representation from the Pioneer Public Interest Law Center and Greater Boston Legal Service, two organizations opposed to equity theft. She also received pro bono assistance from the Boston law firm Morgan, Lewis & Bockius.
According to the Pioneer’s Bailey, there are other pending “equity theft” cases in the state and at least one in federal court in Massachusetts.
The decision in Mills’ case, while encouraging, doesn’t set a statewide precedent, and so isn’t binding on other courts hearing similar cases, Bailey said. But a similar decision in a case before the state Supreme Judicial Court would be, he said.
“Our hope is for an eventual SJC ruling that Chapter 60 is unconstitutional,” he said. “That would completely do away with equity theft in Massachusetts.”
Bailey said an alternative to a SJC ruling would be an enactment by the state Legislature that explicitly prohibits equity takings.
We support the more expeditious method, either judicial or legislative, that removes the right of municipalities to rob homeowners of their property’s entire value over an unpaid tax bill.
Cities and towns, take what you’re owed, but relinquish the rest of a foreclosure’s proceeds to the rightful owner.