NAHB Joint Efforts Successful in Minnesota Takings Case
In a key win for NAHB and private property owners, the Supreme Court on May 25 handed down a unanimous decision delivering a victory to a landowner in a takings case out of Hennepin County, Minn. The landowner, 94-year-old Geraldine Tyler, owned a condominium that accumulated approximately $2,300 in unpaid real estate taxes and $13,000 in interest and penalties. The county sold Ms. Tyler’s property for $40,000, which satisfied her $15,000 tax debt. But under Minnesota law, the county kept the $25,000 in excess proceeds as a windfall.
Ms. Tyler sued Hennepin County, alleging the seizure of the excess proceeds from the sale of her house constituted a violation of the Fifth Amendment’s takings clause and a violation of the Eighth Amendment’s prohibition on excessive fines. At the trial court level, the case was dismissed for failure to state a claim. The Eighth Circuit affirmed.
Upon review, the Supreme Court found that Ms. Tyler’s lawsuit did in fact state a plausible claim. The county keeping the excess proceeds constituted a taking.
Seizing upon points raised in NAHB’s joint amicus brief, the Supreme Court noted that while state law is an important source of property rights, it cannot be used to circumvent traditional property interests. The Supreme Court also recognized the brief’s argument that since the Magna Carta, English and American common law has required governments to return any surplus from property taken to pay tax debts.
Again agreeing with the brief, the Supreme Court acknowledged the inconsistency of Minnesota law on the issue of excess proceeds. Banks in Minnesota are required by state law to return excess proceeds from a foreclosure sale to the home owner.
Minnesota law also protects the taxpayer’s right to surplus when collecting past due taxes on income or personal property. Yet, in the context of real estate taxes, Minnesota was pocketing the excess in real estate tax sales. This inconsistency was glaring to the unanimous Supreme Court.
Lastly, the Supreme Court rejected Hennepin County’s argument that Ms. Tyler had abandoned her property by failing to pay taxes, and therefore, had no right to the excess proceeds. The Supreme Court succinctly stated the county cannot “frame... [the failure to pay taxes] …as abandonment to avoid the demands of the Takings Clause.”
This win is not only important to Ms. Tyler but to property owners nationwide. No longer can localities seize windfalls on the excess proceeds from tax sales. This case also makes clear that states cannot circumvent traditional property rights via state law.
Latest from NAHBNow
The U.S. Department of the Treasury and the Internal Revenue Service have announced new Opportunity Zone designations for more than 6,500 communities nationwide, effective Jan. 1, 2027.
Member-to-member recruitment is essential for growing NAHB’s membership. Here are the perks members are being rewarded with for their efforts.
Latest Economic News
The U.S. labor market rebounded in October, with nonfarm payroll employment increasing by 165,000 jobs and the unemployment rate declining to 4.1%. However, the improvement in overall employment contrasts with continued weakness in residential construction, where employment fell by 16,400 jobs, the largest monthly decline since March 2021.
New multifamily housing confidence weakened year-over-year in the third quarter, according to the Multifamily Market Survey (MMS) by the National Association of Home Builders (NAHB). The MMS produces two separate indices. The Multifamily Production Index (MPI) had a reading of 41, down five points year-over-year, while the Multifamily Occupancy Index (MOI) had a reading of 69, also down five points year-over-year.
Mortgage application activity declined in October as the 30-year fixed mortgage rate rose sharply again. The Mortgage Bankers Association’s (MBA) Market Composite Index, a measure of total mortgage application volume, fell 14.1% month-over-month in October on a seasonally adjusted basis. Compared to a year ago, total mortgage applications were 39.8% lower.