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SCOTUS Issues GVR in Takings Cases in Light of Tyler

Amanda Karras

Mon, Jun 5, 2023 4:44 PM

In Cont'l Res. v. Fair, 311 Neb. 184 (2022), the Supreme Court of Nebraska considered the constitutionality of its tax forfeiture scheme and found that it did not violate the Fifth Amendment's Takings Clause. In Nebraska, each county has an automatic lien on property within its boundaries based on the property taxes that are due. The state allows counties to sell their liens to investors to purchase tax certificates once properties become delinquent on their taxes. There are notice provisions related to the sale of the tax certificate which are not at issue in this case. The private purchaser of the tax certificate must pay the county the amount of taxes owed, plus interest, and costs. The certificate holder then pays the property taxes going forward to the county. The owner of the property may still redeem the property for three years by paying the full amount listed on the tax certificate plus all other taxes paid by the certificate holder as well as any interest and other fees due. After three years, the certificate holder may apply for a tax deed. The tax certificate holder must provide additional notice to the property owners of its intention to do so. If the property owner does not pay off the tax debt, at this point under state law, title passes free and clear to the tax certificate holder and the original property owner is not entitled to any surplus equity.

In this case, a married couple, the Fairs, was living in their home and owned it free and clear of any encumbrances, but they failed to pay the $588.21 in property taxes they owed. The county went through the above-described process and title eventually passed to a tax certificate holder after the requisite time periods elapsed and the Fairs failed to make any tax payments. The total amount of unpaid property taxes, fees, and interest amounted to $5,268. The tax certificate holder applied for a tax deed and the county issued it the deed for the property, which was valued at nearly $60,000.

The Fairs sued the county claiming various constitutional violations including that issuing the tax deed to the third-party tax certificate holder constituted a taking of the equity in the property in surplus of the tax debt in violation of the Fifth Amendment. As relevant here, the Supreme Court of Nebraska held that Nebraska property law does "not recognize a property interest in the surplus equity value of property after a tax certificate has been sold, the redemption period has expired, and a tax deed is requested and issued." Fair, 311 Neb. at 200. Because there must be a valid and recognized property interest for a takings claim to succeed, the Nebraska Supreme Court found that the Fairs' claims must fail as no such property interest exists in Nebraska.

The Supreme Court also GVR's a companion case out of Nebraska, Nieveen v. TAX 106, 311 Neb. 574 (2022), which relied on Fair to conclude that a similarly situated homeowner could not bring a takings claims under Nebraska law.

In issuing the GVRs today, the U.S. Supreme Court is sending these cases back to the Nebraska Supreme Court, signaling to that court that its holdings are incorrect in light of Tyler. Because Tyler stood for the proposition that a county violates the Takings Clause by keeping the surplus equity after a tax foreclosure, the decision to send these cases back is not altogether surprising. But it does underscore two important points. First, the county can be liable for a takings violation even if a private party keeps the surplus equity, not the county. State laws must therefore be amended in light of Tyler to ensure that a homeowner receives any surplus equity after the tax debt and interest are paid off. Second, in the Fair case, the Supreme Court of Nebraska rejected the claim based on its own state law not recognizing a property right in surplus equity, just as the Eighth Circuit had concluded that Minnesota law similarly did not recognize such a right in the Tyler case. The Supreme Court's decision in these Nebraska cases provides further evidence that it is not enough that state law does not recognize a property right in this context. Instead, the Supreme Court is telling the states that there is such an interest in the surplus equity, regardless of what their state laws have to say about it.

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Amanda Karras (she/her)
Executive Director / General Counsel
International Municipal Lawyers Association
P: (202) 466-5424 x7116
D: (202) 742-1018
51 Monroe St. Suite 404 Rockville, MD, 20850
Plan Ahead! See IMLA's upcoming eventshttps://imla.org/events/, calls and programming.
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This morning, the Supreme Court GVR'd (granted, vacated, and remanded) two cases for further consideration in light of its decision in Tyler v. Hennepin County. (To read IMLA's blog on that case, click here: https://imla.org/2023/05/tyler-v-hennepin-county/). A GVR is typically a one-line notation on the Supreme Court's order list sending a case back to the lower court (in this case, the Supreme Court of Nebraska) to consider the case again after the Supreme Court rules in a related case. Both cases involved Nebraska's tax forfeiture scheme, which has now been called into question because of the Tyler case. Given that the Nebraska scheme did not allow property owners to recoup surplus equity after they lost title to their property for failing to pay their taxes, the GVR is not breaking new ground. But the cases further reinforce the holding in Tyler and apply it to a different tax delinquency scheme. In Cont'l Res. v. Fair, 311 Neb. 184 (2022), the Supreme Court of Nebraska considered the constitutionality of its tax forfeiture scheme and found that it did not violate the Fifth Amendment's Takings Clause. In Nebraska, each county has an automatic lien on property within its boundaries based on the property taxes that are due. The state allows counties to sell their liens to investors to purchase tax certificates once properties become delinquent on their taxes. There are notice provisions related to the sale of the tax certificate which are not at issue in this case. The private purchaser of the tax certificate must pay the county the amount of taxes owed, plus interest, and costs. The certificate holder then pays the property taxes going forward to the county. The owner of the property may still redeem the property for three years by paying the full amount listed on the tax certificate plus all other taxes paid by the certificate holder as well as any interest and other fees due. After three years, the certificate holder may apply for a tax deed. The tax certificate holder must provide additional notice to the property owners of its intention to do so. If the property owner does not pay off the tax debt, at this point under state law, title passes free and clear to the tax certificate holder and the original property owner is not entitled to any surplus equity. In this case, a married couple, the Fairs, was living in their home and owned it free and clear of any encumbrances, but they failed to pay the $588.21 in property taxes they owed. The county went through the above-described process and title eventually passed to a tax certificate holder after the requisite time periods elapsed and the Fairs failed to make any tax payments. The total amount of unpaid property taxes, fees, and interest amounted to $5,268. The tax certificate holder applied for a tax deed and the county issued it the deed for the property, which was valued at nearly $60,000. The Fairs sued the county claiming various constitutional violations including that issuing the tax deed to the third-party tax certificate holder constituted a taking of the equity in the property in surplus of the tax debt in violation of the Fifth Amendment. As relevant here, the Supreme Court of Nebraska held that Nebraska property law does "not recognize a property interest in the surplus equity value of property after a tax certificate has been sold, the redemption period has expired, and a tax deed is requested and issued." Fair, 311 Neb. at 200. Because there must be a valid and recognized property interest for a takings claim to succeed, the Nebraska Supreme Court found that the Fairs' claims must fail as no such property interest exists in Nebraska. The Supreme Court also GVR's a companion case out of Nebraska, Nieveen v. TAX 106, 311 Neb. 574 (2022), which relied on Fair to conclude that a similarly situated homeowner could not bring a takings claims under Nebraska law. In issuing the GVRs today, the U.S. Supreme Court is sending these cases back to the Nebraska Supreme Court, signaling to that court that its holdings are incorrect in light of Tyler. Because Tyler stood for the proposition that a county violates the Takings Clause by keeping the surplus equity after a tax foreclosure, the decision to send these cases back is not altogether surprising. But it does underscore two important points. First, the county can be liable for a takings violation even if a private party keeps the surplus equity, not the county. State laws must therefore be amended in light of Tyler to ensure that a homeowner receives any surplus equity after the tax debt and interest are paid off. Second, in the Fair case, the Supreme Court of Nebraska rejected the claim based on its own state law not recognizing a property right in surplus equity, just as the Eighth Circuit had concluded that Minnesota law similarly did not recognize such a right in the Tyler case. The Supreme Court's decision in these Nebraska cases provides further evidence that it is not enough that state law does not recognize a property right in this context. Instead, the Supreme Court is telling the states that there is such an interest in the surplus equity, regardless of what their state laws have to say about it. [logo]<https://imla.org/> [facebook icon]<https://www.facebook.com/InternationalMunicipalLawyersAssociation/>[twitter icon]<https://twitter.com/imlalegal>[linkedin icon]<https://www.linkedin.com/company/international-municipal-lawyers-association-inc./> Amanda Karras (she/her) Executive Director / General Counsel International Municipal Lawyers Association P: (202) 466-5424 x7116 D: (202) 742-1018 51 Monroe St. Suite 404 Rockville, MD, 20850 Plan Ahead! See IMLA's upcoming events<https://imla.org/events/>, calls and programming. Check out our On-Demand webinar library<https://netforum.avectra.com/eweb/shopping/shopping.aspx?site=imla&webcode=shopping&cart=0&shopsearchCat=Merchandise&productCat=Webinar> with 100+ webinars at your fingertips!

Amanda Karras

Tue, Jun 27, 2023 11:50 AM

I also think this would be a good topic for discussion during the county working group meeting next week on 7/5 at 3 pm eastern.

Thanks,
Amanda

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From: Amanda Karras
Sent: Monday, June 5, 2023 12:44 PM
To: 'la@lists.imla.org' la@lists.imla.org; cityattorneys@lists.imla.org; counties@lists.imla.org; Landuse@lists.imla.org
Subject: SCOTUS Issues GVR in Takings Cases in Light of Tyler

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A member is asking about possible legislative fixes for their state's tax forfeiture laws in light of the Tyler and Fair SCOTUS decisions (see description below and the link to the IMLA Blog if you are not familiar with those decisions). In light of these decisions, if you think your state's tax forfeiture laws are constitutional, can you reach out to me and describe how they work and provide statutory citations? The requestor at the moment is in a state similar to Nebraska's (described below) whereby tax certificate holders eventually receive the surplus equity, not the counties (and not the original homeowner). I believe Maryland for example allows the former owner to receive the balance / surplus equity after the tax certificate holder goes through the entire process and title vests with the tax certificate holder. Please send me your responses to akarras@imla.org<mailto:akarras@imla.org>. I also think this would be a good topic for discussion during the county working group meeting next week on 7/5 at 3 pm eastern. Thanks, Amanda [logo]<https://imla.org/> [facebook icon]<https://www.facebook.com/InternationalMunicipalLawyersAssociation/>[twitter icon]<https://twitter.com/imlalegal>[linkedin icon]<https://www.linkedin.com/company/international-municipal-lawyers-association-inc./> Amanda Karras (she/her) Executive Director / General Counsel International Municipal Lawyers Association P: (202) 466-5424 x7116 D: (202) 742-1018 51 Monroe St. Suite 404 Rockville, MD, 20850 Plan Ahead! See IMLA's upcoming events<https://imla.org/events/>, calls and programming. Check out our On-Demand webinar library<https://netforum.avectra.com/eweb/shopping/shopping.aspx?site=imla&webcode=shopping&cart=0&shopsearchCat=Merchandise&productCat=Webinar> with 100+ webinars at your fingertips! From: Amanda Karras Sent: Monday, June 5, 2023 12:44 PM To: 'la@lists.imla.org' <la@lists.imla.org>; cityattorneys@lists.imla.org; counties@lists.imla.org; Landuse@lists.imla.org Subject: SCOTUS Issues GVR in Takings Cases in Light of Tyler This morning, the Supreme Court GVR'd (granted, vacated, and remanded) two cases for further consideration in light of its decision in Tyler v. Hennepin County. (To read IMLA's blog on that case, click here: https://imla.org/2023/05/tyler-v-hennepin-county/). A GVR is typically a one-line notation on the Supreme Court's order list sending a case back to the lower court (in this case, the Supreme Court of Nebraska) to consider the case again after the Supreme Court rules in a related case. Both cases involved Nebraska's tax forfeiture scheme, which has now been called into question because of the Tyler case. Given that the Nebraska scheme did not allow property owners to recoup surplus equity after they lost title to their property for failing to pay their taxes, the GVR is not breaking new ground. But the cases further reinforce the holding in Tyler and apply it to a different tax delinquency scheme. In Cont'l Res. v. Fair, 311 Neb. 184 (2022), the Supreme Court of Nebraska considered the constitutionality of its tax forfeiture scheme and found that it did not violate the Fifth Amendment's Takings Clause. In Nebraska, each county has an automatic lien on property within its boundaries based on the property taxes that are due. The state allows counties to sell their liens to investors to purchase tax certificates once properties become delinquent on their taxes. There are notice provisions related to the sale of the tax certificate which are not at issue in this case. The private purchaser of the tax certificate must pay the county the amount of taxes owed, plus interest, and costs. The certificate holder then pays the property taxes going forward to the county. The owner of the property may still redeem the property for three years by paying the full amount listed on the tax certificate plus all other taxes paid by the certificate holder as well as any interest and other fees due. After three years, the certificate holder may apply for a tax deed. The tax certificate holder must provide additional notice to the property owners of its intention to do so. If the property owner does not pay off the tax debt, at this point under state law, title passes free and clear to the tax certificate holder and the original property owner is not entitled to any surplus equity. In this case, a married couple, the Fairs, was living in their home and owned it free and clear of any encumbrances, but they failed to pay the $588.21 in property taxes they owed. The county went through the above-described process and title eventually passed to a tax certificate holder after the requisite time periods elapsed and the Fairs failed to make any tax payments. The total amount of unpaid property taxes, fees, and interest amounted to $5,268. The tax certificate holder applied for a tax deed and the county issued it the deed for the property, which was valued at nearly $60,000. The Fairs sued the county claiming various constitutional violations including that issuing the tax deed to the third-party tax certificate holder constituted a taking of the equity in the property in surplus of the tax debt in violation of the Fifth Amendment. As relevant here, the Supreme Court of Nebraska held that Nebraska property law does "not recognize a property interest in the surplus equity value of property after a tax certificate has been sold, the redemption period has expired, and a tax deed is requested and issued." Fair, 311 Neb. at 200. Because there must be a valid and recognized property interest for a takings claim to succeed, the Nebraska Supreme Court found that the Fairs' claims must fail as no such property interest exists in Nebraska. The Supreme Court also GVR's a companion case out of Nebraska, Nieveen v. TAX 106, 311 Neb. 574 (2022), which relied on Fair to conclude that a similarly situated homeowner could not bring a takings claims under Nebraska law. In issuing the GVRs today, the U.S. Supreme Court is sending these cases back to the Nebraska Supreme Court, signaling to that court that its holdings are incorrect in light of Tyler. Because Tyler stood for the proposition that a county violates the Takings Clause by keeping the surplus equity after a tax foreclosure, the decision to send these cases back is not altogether surprising. But it does underscore two important points. First, the county can be liable for a takings violation even if a private party keeps the surplus equity, not the county. State laws must therefore be amended in light of Tyler to ensure that a homeowner receives any surplus equity after the tax debt and interest are paid off. Second, in the Fair case, the Supreme Court of Nebraska rejected the claim based on its own state law not recognizing a property right in surplus equity, just as the Eighth Circuit had concluded that Minnesota law similarly did not recognize such a right in the Tyler case. The Supreme Court's decision in these Nebraska cases provides further evidence that it is not enough that state law does not recognize a property right in this context. Instead, the Supreme Court is telling the states that there is such an interest in the surplus equity, regardless of what their state laws have to say about it. [logo]<https://imla.org/> [facebook icon]<https://www.facebook.com/InternationalMunicipalLawyersAssociation/>[twitter icon]<https://twitter.com/imlalegal>[linkedin icon]<https://www.linkedin.com/company/international-municipal-lawyers-association-inc./> Amanda Karras (she/her) Executive Director / General Counsel International Municipal Lawyers Association P: (202) 466-5424 x7116 D: (202) 742-1018 51 Monroe St. Suite 404 Rockville, MD, 20850 Plan Ahead! See IMLA's upcoming events<https://imla.org/events/>, calls and programming. Check out our On-Demand webinar library<https://netforum.avectra.com/eweb/shopping/shopping.aspx?site=imla&webcode=shopping&cart=0&shopsearchCat=Merchandise&productCat=Webinar> with 100+ webinars at your fingertips!