U.S. Supreme Court's property forfeiture decision spurs class-action lawsuit in Minnesota

An aerial photo
An aerial photo shows Geraldine Tyler's condominium in Minneapolis.
Kerem Yücel | MPR News

In May, the U.S. Supreme Court ruled that Hennepin County violated a Minneapolis woman’s rights when it sold her property for more than she owed in taxes, and kept the surplus.

In the wake of that decision, three law firms have filed a class-action lawsuit on behalf of other Minnesotans who, in similar fashion, lost out on recouping their home’s equity after it was seized for unpaid property taxes.

One of the attorneys, Vildan Teske of Minneapolis, said there could be many potential plaintiffs.

“We are still completing our investigations and discovery, but believe class members likely number in the thousands and they are located throughout Minnesota,” Teske said.

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Geraldine Tyler
Geraldine Tyler
Courtesy of Pacific Legal Foundation

In the Tyler v. Hennepin County decision, a unanimous Supreme Court gave a 94-year-old Geraldine Tyler of Minneapolis a chance to recoup some money after the county kept the entire $40,000 when it sold her condominium in 2016. 

Tyler stopped paying the property taxes on the condo after she moved into a senior apartment in 2010. She owed about $15,000 in unpaid property taxes, interest and fees. 

The Supreme Court decided Hennepin County’s action was an unconstitutional “taking” of private property without just compensation.

Lawsuit seeks equity

On June 23, Teske and other attorneys filed a class-action lawsuit in Ramsey County on behalf of Sharon Sporleder, who lost her Robbinsdale home to tax forfeiture in 2021, and “all others similarly situated.” 

The lawsuit names the state, current and former revenue commissioners, Hennepin and several other counties and their tax officials.

The complaint provides few details about Sporleder’s situation, and her attorneys said she did not wish to speak to the media.

The complaint states that after the taxes on her property in Hennepin County went unpaid, the county seized it. The state of Minnesota currently holds the title. It has not been resold.

Sporleder did not intend to abandon the home, and has “no way” to obtain any of the excess equity, the lawsuit states.

Hennepin County property tax records show Sporleder’s property had an estimated market value of about $224,000 the year before it went into forfeiture. She owed about $33,000 in taxes and special assessments, plus penalties, fees and interest.

The class-action lawsuit likely can’t proceed until the details of the Tyler decision are sorted out. The Supreme Court remanded that case back to district court to determine how much compensation Tyler is entitled to receive and who’s liable.

Awaiting changes

Meanwhile, Minnesota counties are scrambling to figure out how to handle property forfeitures in the wake of the Tyler decision. State lawmakers are expected to consider changes to the state’s forfeiture law during the next legislative session, but that doesn’t start until February.

Hennepin County continues to sell tax-forfeited properties, but isn’t distributing the excess money to local governments and school districts until it receives direction from the Legislature, said Dan Rogan, assistant county administrator and county auditor.

The Association of Minnesota Counties has created a work group that will meet throughout the summer and fall to propose solutions for lawmakers to consider, said Matt Hilgart, government relations manager.

Hilgart said the main goal is to settle on a policy that reflects the Supreme Court’s findings while limiting financial impacts to other property taxpayers, assuming that the cost of the tax forfeiture process will increase. 

Counties have argued that overall, they don’t make a profit on tax forfeitures, because they have to maintain the properties and prepare them for sale.

A house in Itasca County
The Association of Minnesota Counties cites this Itasca County home as an example of the often-substantial costs counties incur to prepare tax-forfeited properties for resale.
Courtesy of AMC

But opponents of the practice say it disproportionately affects the elderly, disabled and people with low incomes, who may not understand notices they receive in the mail or don’t have the means to pay back taxes.

Minnesota is among roughly a dozen states and the District of Columbia that allow local jurisdictions to keep the excess money, according to the Pacific Legal Foundation, a not-for-profit public interest law firm focused on property rights that represented Tyler at the Supreme Court.

Pacific Legal is not involved in the class-action lawsuit. But in a statement, Christina Martin, the attorney who argued the case before the Supreme Court, said the decision makes it clear that the government cannot take more than what it is owed.

“We are glad to see class action attorneys pressing to protect the rights of the many people like Ms. Tyler across the state of Minnesota who are owed just compensation,” Martin stated.