Pushback with Columnist Al Norman: Let’s end ‘home equity theft’

  • Al Norman

Published: 4/20/2022 8:32:30 AM
Modified: 4/20/2022 8:31:13 AM

Mitch Speight and Joan Marie Jackson bought their Victorian home in Greenfield in 1997. The couple, who are costume designers for theatrical shows, paid off their mortgage in 2012. But the COVID-19 pandemic brought down the curtain on thousands of theatrical shows, and the couple fell behind on their property taxes..

Mitch and Joan’s property is currently assessed at $275,100. As of March 17, 2022, Mitch and Joan owed $55,728 to the City of Greenfield of which $35,621 was for property taxes/water/sewer, and 36% ($20,107) was added as interest and legal fees.

On Dec. 29, the couple was served a “Notice to Quit” by a law firm authorized by the city. “You will have until February 1, 2022 to vacate,” the letter said, “or I will go to the Greenfield Housing Court and seek permission to evict you.” But the greatest shock was yet to come.

Massachusetts is one of 12 states that allow a municipality to take a “tax title” on a home for back taxes. The city not only recoups taxes, interest and legal fees but gets the entire equity in the property. According to research published by attorney Ralph C. Clifford, of the University of Massachusetts School of Law at Dartmouth, the “tax collector can execute and record a deed that transfers fee simple title to the real estate to the municipality … all of the taxpayer’s rights in the property … are terminated by the foreclosure process. Title to the taxpayer’s real estate is taken by the government without a hearing. Based on an unreviewed decision by a municipal tax collector, the taxpayer immediately loses title to the land … the municipality engages in the taking of property without providing reasonable compensation. The property’s value significantly exceeds the debt owed, giving the municipality the ability to collect almost $50 for every dollar of delinquent real estate tax owed, on average. Each year, approximately $56 million is unconstitutionally appropriated from taxpayers.”

This “tax title” process has been described as “home equity theft.” Once the Land Court enters a judgment foreclosing the homeowners right to “redeem” their property, the city gets the full value of the real estate. The taxpayer is left with nothing. By taking tax title to Mitch and Joan’s property, the city of Greenfield gets a property valued at $275,100 for a tax bill of $55,728 — a potential windfall worth five times the amount of taxes owed. Under state law, a taxpayer can be stripped of almost all aspects of title and possession except a right of redemption within one year — if they can raise the funds needed to pay off the city. Should the tax collector choose, the taxpayer can be tossed out of their home, and the city can take “immediate possession” of the property.

A year ago, legislation was filed on Beacon Hill to protect homeowner’s equity. Representatives Jeffrey Roy (D-Franklin) and Tommy Vitolo (D-Brookline), told the Committee on Revenue that H. 3053 would stop municipalities from being “unfairly enriched” by not paying the taxpayer “the differential between the taxes owed and the value of the property.” “It’s unfair for the government to take the entire value of someone’s home to settle a small debt,” says Daniel Dew, director of legal policy at Pacific Legal Foundation. “Most states require surplus funds from such foreclosures to be returned to the owner once debts are settled.” In 2020, Michigan’s Supreme Court ordered counties to return surplus funds to property owners once debts are paid.

Mitch and Joan hired an attorney, and gathered more than $55,728 to pay off their debt. If Greenfield had taken the title, and sold the house for its assessed value, the city would have made a windfall profit of $219,372. All municipalities across Massachusetts should give homeowners a reasonable repayment schedule, as well as a hearing prior to a tax title taking. If a home is taken, municipalities should guarantee the homeowner receives all profits from a sale above what’s required to make the city whole for delinquent taxes, interest and legal fees. The theft of home equity must stop.

“This action of confiscating wealth is predatory and unconstitutional,” Mitch explains. “Municipalities should only be afforded the principle, interest and collection costs due them.” “This was a failed attempt by the City of Greenfield to confiscate our equity,” Joan says. “We want the General Court to repeal this egregious law, and cities to protect the real property owners who are having their wealth stolen from them. No homeowners in Massachusetts should endure a punishing process like this.”

Al Norman’s Pushback column appears in the Recorder every third Wednesday of the month. He can be reached at info@sprawl-busters.com


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