Minnesota Legislature Takes Action to Reform Property Forfeiture Laws in Response to Supreme Court Ruling

St. Paul, Minnesota – The Minnesota Legislature is poised to pass new property forfeiture laws in response to a U.S. Supreme Court ruling last year that declared the state’s current system unconstitutional. The Supreme Court’s unanimous decision in the case of Tyler v. Hennepin County found that the county violated a woman’s constitutional rights by selling her forfeited property for more than the amount she owed in taxes and keeping the surplus.

Earlier this year, the state agreed to pay a settlement of $109 million to resolve class action lawsuits filed on behalf of Minnesotans who lost their properties due to unpaid taxes, while the counties retained the surpluses. The settlement was the costliest item in the recently released $477 million budget agreement of the Democratic-Farmer-Labor lawmakers for this session.

Representative Sandra Feist, a Democrat from New Brighton, authored a bill aimed at making Minnesota’s property tax forfeiture process constitutional. The bill proposes requiring a public auction and clear notice to property owners about their entitlement to file a claim for the surplus from the sale. During a committee hearing, Feist emphasized the need for immediate reform to avoid perpetuating a flawed system and adding fiscal liability to the state.

Under the proposed legislation, counties would have 60 days to notify property owners after a public auction that they can claim any surplus, with owners having six months to do so. Advocacy groups involved in developing the legislation have expressed satisfaction with the bill, considering it a fair balance between homeowners and counties. The Pacific Legal Foundation, which represented the plaintiff in the Supreme Court case, had expressed reservations about the proposed changes prior to the legislative hearing.

Following the Supreme Court ruling in May 2023, the Association of Minnesota Counties formed a working group to develop reforms. Initially, the group supported a judicial foreclosure process, but it ultimately endorsed the compromise presented in the bill. However, county officials have raised concerns about the additional work and costs that will be incurred. They will be responsible for conducting public auctions and managing dilapidated properties that may prove difficult to sell, thus requiring maintenance.

Advocates for older, low-income adults have stressed the importance of a new tax forfeiture system. They argue that these individuals heavily rely on the equity of their properties and can be vulnerable to an unfair system. Mary Jo George, the director of advocacy for AARP Minnesota, highlighted the financial impact of the loss of equity on older vulnerable adults who depend on it for economic survival.

The bill has now been forwarded to the House Taxes Committee for further consideration. If passed, it would signify a significant step towards rectifying the alleged constitutional violations and addressing the concerns raised by property owners and advocacy groups.