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Tax Auctions Comply with U.S. Supreme Court Ruling

County Sued for Surplus Funds from Past Auctions

Tax Auctions Comply with U.S. Supreme Court Ruling March 20, 2024
A property sold at a Warren County Real Property Tax Services Office auction.
A property sold at a Warren County Real Property Tax Services Office auction.

Warren County’s sale of tax delinquent properties to the highest bidders raised $1.7 million in October, 2023, but the county did not retain any funds in excess of what was owed in back taxes and fees, as it did in years past.

Rather, it deposited surplus funds into an escrow account, “in accordance with recent U.S. Supreme Court rulings related to tax foreclosure auctions,” a press release from Warren County officials stated, referring to a May 25, 2023, decision by the U.S Supreme Court  that sided with Geraldine Tyler, a 94 year-old Minnesota resident whose condo was seized by Hennepin County in 2015 over $2,300 in unpaid property taxes and $12,700 in penalties and interest. The county sold her house at an auction for $40,000 and kept the difference.

“The principle that a government may not take from a taxpayer more than she owes is rooted in English law and can trace its origins at least as far back as the Magna Carta,” Chief Justice John Roberts wrote in the Court’s ruling. “The taxpayer must render unto Caesar what is Caesar’s, but no more.”

State Legislature Reacts to Supreme Court Decision

The ruling that Minnesota’s foreclosure statute violated the Takings Clause of the US Constitution placed many such auctions on hold as states and counties assessed its significance.

In New York State, the legislature approved a bill establishing a moratorium on so-called in rem tax foreclosures in order to give local governments space to develop methods to reimburse homeowners for excess proceeds.

Governor Hochul, however, vetoed the bill on December 22, 2023 and announced that she would propose language in the 2024-25 budget to reform the state’s property tax enforcement laws and bring them into compliance with the Supreme Court decision.

According to the proposed budget bill, any excess proceeds from tax auctions will be returned to the former owners – just as Warren County did in October, in accordance with a ruling from the Warren County Supreme Court.

A state senator from Long Island, Kevin Thomas, has introduced legislation that, if approved, would affirm the the property owners’ rights to those proceeds.

“In the absence of any additional guidance from the state legislature, we will move forward, using the practices we established last year,” said Warren County attorney Larry Elmen.

Warren County Follows Court-Ordered Procedures

In 2023, at the direction of  the Warren County Supreme Court’s Judgment of Foreclosure,  the county Treasurer notified all parties listed in the “Petition and Notice of Foreclosure” by mail of their right to file a legal claim to the excess funds with the Warren County Supreme Court.

The Warren County Supreme Court was to evaluate the claims and issue an order directing the county Treasurer to distribute the surplus funds from the escrow account.

According to Warren County Administrator John Taflan, Warren County followed the Court-prescribed procedures last October and will continue to do so in the future.

“It’s the right thing to do,” said Taflan. “Our property values are high, and when the county sells properties to the highest bidder, it usually makes money on the transaction. But I don’t think that we will be severely disadvantaged by foregoing those revenues.”

Warren County officials have identified 286 properties  that could be subject to foreclosure and sold at the Warren County Real Property Tax Services Office’s  next annual auction.

County Sued for Surplus Funds from Past Auctions

It has yet to be determined if Warren County is liable for surplus funds retained from tax auctions prior to the 2023 Supreme Court decision.

At the Warren County Board of Supervisor’s March 15 meeting, County attorney Elmen said the county was being sued by the owners or heirs of properties sold at foreclosure auctions in 2019, 2021 and 2022, all of whom seek to recover moneys in excess of what they owed in back taxes and fees.

The suits were filed in U.S. District Court, where the County will direct its response, said Elmen.

According to news reports, the Supreme Court was silent as to whether its 2023 decision applied retroactively, which means this question is now before the federal courts.

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