The American legal system, and the English system from which it is derived, traditionally protected property owners from excessive tax forfeitures. The Magna Carta, which became the cornerstone of the English common-law system and influenced the American Founding, prohibited tax collectors from taking more property than was required to satisfy a debt.
In line with this foundational principle, the U.S. Constitution’s Fifth Amendment requires that just compensation be paid when private property is taken for public use. That rule should decide this case in Tyler’s favor. When a delinquent taxpayer’s home is taken to satisfy an unpaid tax bill, the homeowner is entitled to keep the remainder of the home equity — which is the homeowner’s property. Home-equity theft takes a homeowner’s private property with no just compensation (indeed, without any compensation).
But Hennepin County argues that, under Minnesota law, Tyler’s remaining equity is not hers at all and that it did not seize any property in the first place. This dangerous argument would give states carte blanche to define away property interests and violate the Fifth Amendment with impunity. States should not be allowed to so easily circumvent a core constitutional protection.
Historically, Minnesota courts recognized that a property owner had a right to the remaining equity after a tax-lien foreclosure. But that changed in 1905, when a Minnesota statute determined that all remaining equity instead belonged to the state. The county relies on this statute to argue that Tyler had already lost all interest in her home equity by the time her condo was seized.
To be sure, states have traditionally defined what constitutes private property. But the Supreme Court has held numerous times that if a legislature defines away a property right, that legislature has effectively “taken” the property and must pay just compensation. Just as the government would violate the Fifth Amendment if it seized property without paying for it, the government cannot legislatively convert private property to government property without compensation.
This principle is grounded in history. The Founders recognized that there were limits to how a state could define (or define away) property. In The Federalist Papers, James Madison explained that democracies must be constrained to ensure that property rights are preserved. And during the Constitutional Convention, one of the arguments for ratification of the Constitution was that it would prohibit states from legislatively eliminating certain property rights.
The line between permissible changes to the definition of property and unconstitutional legislative takings may not always be clear, but there is no ambiguity in this case: The county offers no limiting principle to its claim that a legislature can, without paying compensation, define away property however and whenever it chooses. That is unconstitutional.
Local governments such as Hennepin County must be stopped from continuing home-equity theft. The Supreme Court should protect Tyler’s property and make clear that home-equity theft is unconstitutional.