Evaluating Massachusetts’ Tax Lien Foreclosure Laws Post Tyler v. Hennepin County
Last term, in Tyler v. Hennepin County, the Supreme Court ruled Minnesota’s tax lien foreclosure scheme unconstitutional, in violation of both the Fifth Amendment’s Takings Clause and the Eighth Amendment’s Excessive Fines Clause. Minnesota is one of twelve states, in addition to the District of Columbia, with tax lien foreclosure statutes. Sometimes referred to as “tax and take seizures” or “home equity theft,” these laws differ significantly from a typical bank foreclosure proceeding in which a homeowner can only lose equity already owed as debt. By contrast, foreclosure under tax lien laws can result in a homeowner losing the entire value of their home—often a financial loss multitudes greater than what the homeowner actually owed. Massachusetts is among the states that permit this practice. In the wake of the Tyler ruling, whether the law can or should remain on the books is worth examining.
Ms. Geraldine Tyler
In Tyler, Geraldine Tyler owed $15,000 in property taxes, but when Hennepin County foreclosed on her home and sold it for $40,000, it was able to keep the $25,000 balance of her equity. As Chief Justice John Roberts said, writing for a unanimous court, “The taxpayer must render unto Caesar what is Caesar’s, but no more.”
Massachusetts’ tax lien foreclosure law, found in Chapter 60, was passed in 1996 amidst a statewide budget crisis. According to Dan Bosely, the former legislator who wrote the law, it seemed like a creative revenue generator at the time, a way to help communities recoup lost revenue when people were not paying their real estate taxes or water and sewer bills. But the practice has been widely criticized by consumer advocates, and according to professors and lawyers familiar with tax lien laws across the country, the industry targets those in distress, mostly elderly and poor homeowners. According to Joshua Polk, an attorney with the Pacific Legal Foundation who has litigated three Massachusetts-based cases, “It’s a transfer of wealth from the poorest people to either government entities or extremely wealthy investors.” In 2018, Bosely himself expressed concern about the consequences of the legislation. From 2014 to 2021, Massachusetts residents subject to tax lien foreclosure lost 82% of their home equity, which amounted to an average loss of $172,000 per homeowner.
Under the current Massachusetts law, a municipality can take control of a property itself or sell the right to foreclose to a private buyer. In the past decade, one Boston based investment company, Tallage Inc., has purchased two thousand tax liens from thirty cities and towns. According to Tallage’s general counsel, the company is acting in the public good, helping recoup lost revenue needed to pay for public schools, police stations, and firefighters. In fact, cash-strapped cities such as Worcester, Lowell, New Bedford, Pittsfield, and Quincy use tax lien foreclosures more often, likely due to a dire need to fill city coffers. However, whether thrusting people into more acute financial precarity or homelessness might not also have collateral consequences for a city’s bottom line seems worth examining. Further, when these third-party intermediaries are involved, private investors such as Tallage, not the municipality and its taxpayers, reap the lion’s share of the financial payout.
In the wake of the Tyler ruling, an editorial in the Boston Globe urged Massachusetts to use this moment to reform its tax foreclosure laws: “Protecting the rights of homeowners ought to be part of any future legislative housing package.” Whether Tyler by itself invalidates the Massachusetts law is a different question. Unlike in Minnesota, Massachusetts tax foreclosures often happen through intermediaries like Tallage, making the government’s role more attenuated and thus potentially less dubious as a constitutional matter. Further, all Massachusetts tax foreclosures go through a Land Court hearing, at which, per a 2016 ruling, an owner may request a judicial sale to retain their equity in the property. Whether this provides any extra measure of protection is questionable though, as many individuals facing foreclosure may be unaware of these rights and unable to obtain legal counsel. Regardless of whether these procedural differences actually afford homeowners any more substantive protections, they are enough—from Tallage’s perspective—to place Massachusetts’ law squarely outside the scope of Tyler’s ruling.
To others, Tyler provides a clear mandate to change Massachusetts’ current statutory scheme. During a hearing of the Joint Committee on Revenue in June 2023, First Assistant Attorney General Pat Moore called the Massachusetts law a “classic unconstitutional taking,” undistinguishable from the one the Supreme Court just struck down. A case winding its way through the Massachusetts courts—in which a Worcester woman stands to lose $250,000 over a $2,600 unpaid tax bill—may soon clarify whether the judiciary will permit the practice to continue throughout the commonwealth.
Even if the Massachusetts courts find the Chapter 60 provisions distinguishable from those at issue in Tyler, the practice is problematic and the legislature should take action. According to UMass law professor Ralph Clifford, municipalities collect an average of $50 for every $1 of delinquent real estate owed. Raising revenue off the backs of a state’s poorest and medically compromised citizens and depriving them of the equity they have built up over years, even if constitutional, is surely unsound policy.
The Massachusetts State House
Boston, 1787
In February, 2023 Rep. Jeffrey Roy (D-Franklin) and Rep. Tommy Vitolo (D-Brookline) introduced H. 2937, “An act relative to tax deeds and protecting equity for homeowners facing foreclosure.” This bill would bring the law surrounding tax lien foreclosures in line with that governing mortgage foreclosures: a municipality would still have license to sell a property burdened by unpaid tax debt, but additional money from the sale, beyond the debt owed, would be returned to the homeowner. Another bill, H.2907, filed by Rep. Tram Nguyen (D-Andover), addresses concerns surrounding notice. While towns are required to provide written notice to homeowners at risk of tax foreclosure, the requirement is minimal and, given contemporary realities of how information is consumed, inadequate. According to a legal aid lawyer familiar with these cases, “Maybe [the requirements] made sense 100 year ago when people got their information from going to town hall or the post office, or from a newspaper…but in the context of our world today, using those procedures is calculated not to give notice, but to hide it from people.” H.2907 would require notice be understandable to an unsophisticated consumer. Given that those affected by tax lien foreclosures are usually elderly, medically compromised, or without the resources to hire an attorney, such enhanced procedural safeguards seem prudent.
Massachusetts legislators have filed bills addressing these issues in the past. With Tyler shining a national spotlight on this issue, advocates are hopeful the moment is ripe for reform. The legislature should not wait for the courts to take action in the wake of Tyler. Regardless of whether the current scheme passes constitutional muster from the perspective of the judiciary, real policy concerns with the statutory scheme have been exposed. The legislature has itself deemed, per Mass. Gen. Laws ch. 93, § 46, that a practice need not be illegal to be an unfair and unreasonable manner of debt collection. Legislators should seize on this moment to act as independent constitutional actors and pass the aforementioned legislation. Further, any reform regarding these laws would be remiss not to provide remedial measures for those who have already suffered injury due to this predatory practice.
Edie Leghorn anticipates graduating from Boston University School of Law in May 2025.
