Middletown City Attorney Talks Recent Changes in Delinquent Property Tax Enforcement

City Hall in Middletown, N.Y., on May 16, 2023. Cara Ding/The Epoch Times

Middletown City Attorney Alex Smith told The Epoch Times that the recent amendment of delinquent property tax enforcement is significant for homeowners.

In September, the city council amended its laws governing enforcement of delinquent property taxes based on the Tyler v. Hennepin County decision by the U.S. Supreme Court, which upheld property owners’ right to the remaining home equity after payment of due taxes and fees.

“It was a big decision—very, very big,” Mr. Smith said. “In the past, when property owners did not pay their taxes, and there was a tax foreclosure, the city would hold a tax lien sale, and the purchasers would bid for it. If the property owner did not pay the taxes a year after the tax lien sale, the property would be conveyed to the tax lien purchaser or the city.”

Purchasers generally come in two kinds: bulk buyers who make money through interest on back taxes and private investors who profit by flipping the properties.

“Say a property was worth $300,000, and there was $30,000 in back taxes and $20,000 fees; the city or the tax lien purchaser would simply take over the property and retain whatever value is left after paying off all the debts, and, in my example, it would be $250,000,” he said.

“What the Supreme Court said is that you can’t just do it that way. If a property has any value left, which most properties do, the owners must be reimbursed the value.”

Middletown amended the city charter accordingly and held a public hearing on the changes in early October, according to Mr. Smith.

“Now the tax lien purchaser will not be entitled to the property until the city gets proof that the purchaser has obtained an appraisal, used the appraisal to calculate the amount the property owner must be reimbursed, and notified the property owner of the amount,” he said.

Following the Supreme Court ruling, the state Legislature in June passed a one-year moratorium on most foreclosures because of back taxes to allow for time to fix the state law accordingly.

The plaintiff in the case, 94-year-old Geraldine Tyler from Hennepin County, Minnesota, fell behind on the property tax payments of her one-bedroom condo after moving to a new apartment to avoid harassment.

When her back taxes and fees reached $15,000, the county moved to foreclose on her condo.

The government sold her condo, with an estimated market value of $93,000, for $40,000 and kept to itself all the proceeds, which prompted Ms. Tyler to sue based on the Fifth Amendment to the U.S. Constitution, which states, in part, “nor shall private property be taken for public use, without just compensation.”

Pacific Legal Foundation, a nonprofit public interest law firm, represented Ms. Tyler in the case.

The nonprofit group has long called such foreclosures “home equity theft” and produced a report last year finding that 12 states and the District of Columbia allow such acts.

In the Supreme Court’s unanimous opinion in the Tyler case, Chief Justice John Roberts wrote, “The taxpayer must render unto Caesar what is Caesar’s, but no more.”