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U.S. Supreme Court: Home Equity Is Constitutionally Protected Property Right

on Tuesday, 6 June 2023 in Dirt Alert: David C. Levy, Editor

Tyler v. Hennepin Cnty., Minnesota, 598 U.S. __ (2023)

The U.S. Constitution protects private property rights.  The Fifth Amendment’s Takings Clause forbids states and the federal government from taking private property for public use without just compensation.

Homeowner Geraldine Tyler owed $15,000 in unpaid real estate taxes on her residence.  Under a Minnesota statute, Hennepin County (the “County”) seized the residence, sold it for $40,000, and retained approximately $25,000 in excess profits.

Tyler sued the County.  She claimed the $25,000 in excess equity was private property, and thus the Takings Clause protected it from seizure.  She also contended the County’s actions violated the Eighth Amendment’s ban on excessive fines.  The trial and appellate courts rejected her claims.

The U.S. Supreme Court reversed.  The Court held the excess equity in Tyler’s residence qualified as “private property” under the Takings Clause.  While the County could use the sale proceeds to recover the unpaid taxes, it committed an unconstitutional taking when it retained the excess equity.

The County unsuccessfully argued Tyler had constructively abandoned her property when she failed to pay the taxes.  The Court held that tax delinquency was insufficient to establish abandonment.  Abandonment instead requires an owner’s prolonged failure to make any use of their property, and a more conclusory renunciation of ownership.

Because the Court ruled in Tyler’s favor on her Takings Clause claim, it did not resolve her Eighth Amendment claim.  However, in a concurring opinion, Justice Neil Gorsuch (joined by Justice Ketanji Brown Jackson) held Tyler also would have prevailed on that claim.

While states enjoy the right to tax their citizens and even punish those who fail to timely pay, that power has limits.  This opinion helps to define those limits.

Hannes D. Zetzsche
Vasili F. Sgourakis, Summer Associate


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