The U.S. Supreme Court on June 23 ruled unanimously that a Michigan county does not have to compensate a homeowner whose home was sold for unpaid taxes based on the property’s hypothetical fair market value.
The case came three years after the Supreme Court ruled unanimously in Tyler v. Hennepin County, Minnesota, that a county wronged a grandmother when it forced the sale of her condominium over an unpaid tax debt and kept sale proceeds that far exceeded the tax she owed. Critics call this practice “home equity theft.”
In the case at hand, Pung v. Isabella County, Michigan, the Supreme Court looked at whether the U.S. Constitution requires local governments to compensate homeowners based on the fair market value of a property seized for tax arrears, or merely refund the surplus left over from a government auction.
Justice Samuel Alito wrote the court’s majority opinion in the case.
“The proper baseline under the Takings Clause [of the Fifth Amendment] is the price obtained in a tax sale, at least when the sale is fairly conducted in light of our country’s history of tax sales,” Alito wrote.
“Following a tax sale, the Eighth Amendment Excessive Fines Clause does not require the government to return more than the surplus proceeds. Neither the Fifth nor the Eighth Amendment requires the government to compensate former owners based on the hypothetical fair market value of the property.”
Justice Clarence Thomas declined to join part of the opinion. He wrote a separate opinion concurring with the result, which Justice Neil Gorsuch joined in part.
Justice Sonia Sotomayor wrote a concurring opinion, which Gorsuch and Justice Ketanji Brown Jackson joined.
This is a developing story and will be updated.
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