In a recent decision that continues to shape the landscape of property rights in the United States, the Sixth Circuit has applied the findings of a Supreme Court case, Tyler v. Hennepin County, to affirm the right of a property owner to net tax lien foreclosure proceeds. This is another key development for property owners and legal professionals alike in understanding the scope and protection of property rights as enshrined in the constitution.
In Tyler v. Hennepin County, it was concluded that the State of Minnesota violated a property owner’s constitutional rights by retaining the excess sale proceeds from a tax lien sale. Essentially, if a property is sold in a tax lien sale and generates more funds than the owed taxes, the excess belongs to the original owner.
The Sixth Circuit, in the case of Freed v. Thomas, extended this precedent to include agreement with a lower court’s finding that a Michigan county had also violated the Fifth Amendment’s Takings Clause. The Takings Clause prohibits the government from taking private property for public use without just compensation. In this context, it means that when a property is sold due to unpaid taxes, any surplus proceeds above and beyond the owed tax debt are justly owed to the original property owner, not the government entity that conducted the sale.
This thematic consistency in court decisions confirms for legal professionals and corporate entities alike that the courts are currently favoring an interpretation that advocates for owner’s rights to net tax lien foreclosure proceeds. Furthermore, the affirmation of the application of the Takings Clause in this manner sets a clear precedent for future cases, both for courts and legal practitioners.
This article is made in collaboration with Hinshaw & Culbertson – Consumer Crossroads.