Bill addresses Constitutional issues cited in recent court cases
BOSTON – Responding to Constitutional concerns raised by the courts, House Minority Leader Bradley H. Jones, Jr. (R-North Reading) and State Representative Richard M. Haggerty (D-Woburn) recently supported legislation that would allow Massachusetts homeowners to reclaim excess equity on their property when facing foreclosure due to a municipal tax lien.
House Bill 4791, An Act relative to municipal tax lien procedures and protections for property owners in the Commonwealth, was engrossed by the House of Representatives on a vote of 154-0 on June 26.
Under current Massachusetts law, cities and towns can foreclose on a property to settle an unpaid tax debt and retain the full value of the property once it is sold, not just the amount of the original debt. The law also allows municipalities to sell tax liens on delinquent properties to private investors, who can file for foreclosure with the Land Court once the debt is six months old and then keep any profits from the sale of the property.
In 2023, the US Supreme Court ruled in the case of Tyler v. Hennepin County that a Minnesota statute similar to Massachusetts’ was unconstitutional because it denied reasonable compensation to a homeowner for the taking of their property. More recently, a Massachusetts Superior Court judge ruled in the case of Ashley M. Mills v. City of Springfield that current state practices violate Article 10 of the Massachusetts Constitution’s Declaration of Rights and the takings clause of the Fifth Amendment to the US Constitution. The case involved a Springfield homeowner with an unpaid property tax bill of $1,637 who entered into a payment agreement with the city at a 16% interest rate but was unable to keep up with the payments and eventually owed about $17,500 with interest, placing them at risk of losing their home, which had over $200,000 in equity.
A 2022 study conducted by the Pacific Legal Foundation found that “Massachusetts homeowners subjected to tax foreclosure lose 82% of their home equity on average—$172,000 per home.” The study is available online at https://homeequitytheft.org/massachusetts.
House Bill 4791 creates a process by which a former property owner would be able to recover their excess equity following a foreclosure. The bill defines “excess equity” as the surplus of the amount remaining after accounting for the homeowner’s owed taxes and fees, as well as the expenses associated with selling the property.
“The courts have made it clear that current Massachusetts law violates homeowners’ Constitutionally protected rights by depriving them of the hard-earned equity they have built up in their properties over the years,” said Representative Jones. “The changes the House has approved are long overdue and will provide enhanced protections for individuals who are facing foreclosure on their property.”
“This bill provides crucial protections for homeowners against bad-faith collectors who have exploited an unfair tax lien foreclosure process – a practice deemed unconstitutional by the U.S. Supreme Court,” said Representative Haggerty. “We’re not only complying with the court rulings and providing clarity to municipalities on tax lien foreclosure procedures, but more importantly, we are ensuring that the hard-earned home equity homeowners have spent years building isn’t unfairly stripped away.”
Jones and Haggerty said the House bill creates more favorable terms for the debt payment plans a taxpayer can enter into with a municipality to pay off their debt. Under current law, taxpayers are offered a 5-year payment plan but must provide a down payment of 25% of the amount needed to redeem the property. Under the House proposal, the down payment requirement would be lowered to 10% and payment plans would be extended to 10 years.
In addition to strengthening the notice requirements municipalities must provide to homeowners and taxpayers related to property takings for nonpayment of taxes, the House bill also calls for the establishment of a special commission that will conduct a comprehensive study relative to current law and practice around the collection of delinquent property tax revenue by cities and towns in the Commonwealth, with a report due by December 31, 2025.
During floor debate, the House adopted a handful of amendments to the bill, including proposals to:
- require the local treasurer to offer face-to-face meetings with a homeowner who is facing the sale of the tax title to their property; and
- add “deferred” property tax revenue to the list of items to be studied by the special commission created under the bill
The amended bill, which is now House Bill 4801, is currently before the Senate Ways and Means Committee. The Senate previously adopted home equity theft language in its version of the Fiscal Year 2025 budget in May but has yet to take up the issue as a stand-alone bill.
