House of Representatives Bill Aims to Protect the Equity of Foreclosed Property Owners in Atlanta

By Elias DaSilva | September 12, 2024.

A new proposal, approved by the state House of Representatives on Wednesday, seeks to strip cities and towns of the authority to resolve tax debts by selling the home of a delinquent taxpayer and retaining the excess equity for themselves or their agents. Critics have labeled this practice as “equity theft.”

More than a year after the U.S. Supreme Court decision in Tyler v. Hennepin County, which ruled that a Minnesota municipality violated the Takings Clause of the Constitution by selling a foreclosed property and keeping the proceeds exceeding the taxes owed, Massachusetts lawmakers moved to prohibit this practice. On Wednesday, they unanimously passed an Act relative to municipal tax lien procedures and protections for property owners in the Commonwealth.

“This bill is fundamentally about protecting property owners and ensuring cities are compensated,” stated Braintree Representative Mark Cusack, chair of the Joint Committee on Revenue, addressing his colleagues on the House floor.

Following the Tyler decision last summer, First Deputy Attorney General Pat Moore informed the Joint Committee that the state’s Chapter 60 law required a comprehensive review. “Now is the time to amend the statute,” Moore emphasized. “The tax lien foreclosure process described in Chapter 60 of the General Laws is unconstitutional.”

According to Cusack, the bill would align Chapter 60 with constitutional standards by requiring municipalities or their agents to “provide a detailed accounting to the former owner after foreclosure or sale of a property, specifying the amount of surplus equity available after covering the outstanding tax debt, interest, fees, and other sales costs.”

The bill mandates that any surplus equity from the property sale be returned to the taxpayer within 60 days of closing, rather than being retained by an external vendor or a municipality, as is currently practiced.

Property owners who lost their properties to foreclosure after the high court declared the practice unconstitutional in late May 2023 would be eligible for relief under the new law, Cusack noted.

Forms notifying property owners about the foreclosure will be revised to include information about their rights and how to resolve their tax debt before losing their home. The bill proposes extending the allowable timeframes for the tax payment plan from five to ten years and reducing the current down payment requirement from 25% to 10%.

Former property owners who challenge the terms under which their property was sold will have the right to appeal to the Superior Court for a judgment and request a jury trial, Cusack added.

House Speaker Ron Mariano mentioned he had received feedback from several legislators on the issue of home equity. While the bill will help the state comply with the Tyler decision, it also helps residents retain the hard-earned equity they have built up.

“This legislation is not only an effort to ensure that the Commonwealth’s laws align with court rulings, but it is also about protecting the rights of property owners in Massachusetts throughout the tax lien foreclosure process,” he stated.

The State Senate has introduced a similar proposal as an amendment to its annual budget.