The National Association of Realtors® (NAR) lauded wins for property rights in two recent Supreme Court cases. But the two cases dealt with starkly different questions.
The Court Called Out a County for “Home Equity Theft” in the Tyler Case.
In Tyler v. Hennepin County, 93-year-old Geraldine Tyler’s tax foreclosure struggles in Minneapolis reached the Supreme Court.
Tyler had moved out of a condo, and let liens for overdue taxes pile up on the title. After years of nonpayment, she owed Hennepin County a hefty pile of back taxes plus penalties and interest: about $15K.
Hennepin County began foreclosure proceedings. The county then sold off Tyler’s condo for $40K without returning the overage. The state’s law allowed this. Significantly, as NAR has pointed out, quite a few U.S. states have enabled tax agencies to keep profits after foreclosure sales without compensating the debtors.
The National Association of Realtors® Defended Private Property Rights Against Government Intrusions.
But there’s more! It’s not just county governments who’ve been snatching unearned real estate value. Sometimes, private real estate investment companies have pocketed the profits. The Pacific Legal Foundation notes that Arizona, Colorado, Illinois, Montana, Nebraska, and New Jersey have all been allowing private investors to keep profits after resolving tax bills!
Tyler sued Hennepin County. In late 2020, the district court issued a decision. It sided with the county, not Geraldine Tyler. And the Eighth Circuit Court of Appeals upheld the holding for the county.
Both courts said the state law gives homeowners plenty of time, after all, to sort out their tax bills and avert foreclosure.
A Ninety-Three-Year-Old Stood Her Ground.
Rather than back down, Tyler became part of a class-action suit which the Supremes ultimately agreed to hear in early 2023. The Tyler decision came out on May 25, 2023.
The National Association of Realtors® along with its Minnesota chapter and quite a few other groups filed briefs as friends of the court in Tyler v. Hennepin County. They wanted the Supreme Court to weigh in on the tax seizures of homes, like Tyler’s, worth more than the debt the government was going after.
The Supreme Court, in a 9-0 holding, agreed with the elderly homeowner. The Supremes reasoned as follows:
- Hennepin County kept the surplus equity from the condo after the tax foreclosure sale. This imposed a financial harm on Geraldine Tyler.
- Tyler, by neglecting her property taxes, did not give up her interest in the property above and beyond the tax bill she owed.
- An unconstitutional taking had occurred.
So, the Court decided surplus value from foreclosure proceeds don’t belong to the county government. The county must return that surplus to the tax debtors. Keeping the profits over and above the debt that a taxpayer owes violates the Fifth Amendment of the U.S. Constitution.
The Takeaway From the Tyler Case Is Clear.
U.S. property law will protect a homeowner’s equity, even if the owner has fallen afoul of the tax laws. It is not OK for government and industry to scavenge excess value from people whose homes are foreclosed to pay a debt — even a tax debt.
As you see, the Supreme Court in Tyler v. Hennepin County has defended people’s real estate interests, by striking down statutes that allow governments to take people’s property without compensating them. But it also protects some of the most vulnerable homeowners in our country. Fourteen states have applied tax foreclosure procedures like the one faced by Geraldine Tyler in Minnesota. These states now need to rewrite their laws.
And overall, the Supreme Court’s holding encourages and rewards equity building through homeownership.
NAR Also Cheers the Supreme Court’s Ruling in Sackett v. EPA. (Environmentalists Aren’t So Pleased.)
NAR says it appreciates the clarity provided by the Supreme Court’s decision in Sackett v. EPA. The ruling, issued on May 25, 2023, will embolden private real estate owners and developers who want to build on sensitive wetlands.
Here’s what just went down — after a lawsuit that’s been many years in the making.
The Sacketts operate an excavation firm in Idaho. Back in 2007, they set out to build a lakefront house. They started by filling in water with gravel.
The EPA pointed out that the Sacketts were trying to build on wetlands protected through the federal Clean Water Act, and directed the Sacketts to take the gravel out and bin their construction plans.
In 2008, the Sacketts filed suit against the EPA. They wanted a narrower reading of the Clean Water Act than the EPA’s interpretation. Because the wetlands weren’t connected to the lake or other bodies of water, the Sackett’s legal team insisted, the area wasn’t federally protected. This would run contrary to the science of wetland protection, and it would set the definition of waters of the United States back 17 years. And that’s what just happened. On behalf of a 5-to-4 majority of the Justices, Justice Samuel Alito sided with the property developers.
The Real Estate Industry Considers This Ruling a Win—But Is It?
The significance of wetland protection is massive. Wetlands have biodiversity on the level of rainforests. They help maintain a safe climate, buffer us from floods, and let water reach us during droughts.
The real estate industry group NAR is using the court system to try to limit the scope of the Clean Water Act by revising its interpretation of the term waters of the United States as defined under current Environmental Protection Act rules.
The Environmental Protection Agency has just stated:
The agencies are developing a rule…consistent with the U.S. Supreme Court’s May 25, 2023 decision in the case of Sackett v. Environmental Protection Agency. The agencies intend to issue a final rule by September 1, 2023.
The Sackett decision might be a short-term win for real estate development interests, but overall it looks like a loss for wetland protections at a time when fragile ecosystems are being lost at a rapid clip, and climate change is making the situation ever more dire.
NAR insists that “the government should not create excessive barriers in the homebuilding sector” and adds that the country needs 5.5 million more housing units.
The National Association of Realtors® describes itself as the country’s largest trade association. It presses for both residential and commercial development. That’s part of its mission, as its members build their careers by assisting property sellers and buyers.
But the Sackett case is a serious setback for the Clean Water Act — and the streams, wetlands, and waters the law has protected for all of us. And that includes what’s in soaked up by our crops, and running through our faucets.
Supporting References
Blog of the U.S. Supreme Court via SCOTUSBlog.com: Case File – Tyler v. Hennepin County, Minnesota(May 25, 2023).
Tyler v. Hennepin County (PDF), 598 U.S. ___ (2023).
Lawrence Hurley for NBC News: Supreme Court Takes Up Property “Theft” Dispute Over Unpaid Taxes (Jan. 13, 2023).
National Association of REALTORS® Newsroom: NAR Statement on “Home Equity Theft” Court Hearing (Apr. 27, 2023).
National Association of REALTORS® Newsroom: NAR Applauds Two Supreme Court Rulings Upholding Property Rights (May 25, 2023).
Blog of the U.S. Supreme Court via SCOTUSBlog.com: Case File – Sackett v. Environmental Protection Agency(May 25, 2023).
Sackett v. Environmental Protection Agency (PDF), 598 U.S. ___ (2023; also known as Sackett II).
United States Environmental Protection Agency News Release: EPA Statement on Sackett v. EPA (Jun. 26, 2023).
NRDC Explainer: What the Supreme Court’s Sackett v. EPA Ruling Means for Wetlands and Other Waterways (Jun. 5, 2023).
NRDC Press Release: Urgent! Protect Our Wetlands (May 31, 2023).
And as linked.
Photo credits: Lara Jameson and Chris F., via Pexels.