May 31, 2024

Stealing homes right out from under vulnerable owners is just wrong

BY The Editorial BoardThe Boston Globe

The battle over home equity theft — the pernicious practice of cities and towns taking way more than they are entitled to when homeowners fall behind on their property taxes — can and must be settled at the legislative level. And at long last in Massachusetts, that’s where the fight is about to be joined.

It defies belief that a year after a landmark US Supreme Court decision virtually outlawed the practice, Massachusetts cities and towns have continued to pursue actions that in too many cases take from homeowners not just what they owe but all they own.

Now one Superior Court judge here has said enough of this, and one state senator — with the support of a number of colleagues — is determined to fix it before this legislative session ends.

“This party should have been over long ago,” Senator Mark Montigny told the editorial board. “This isn’t about sound fiscal management. This is simply immoral.”

Montigny has been working on the issue and filing legislation since 2018 — long before the Supreme Court moved to settle the matter in Tyler v. Hennepin County, Minnesota. Chief Justice John Roberts, writing on behalf of a unanimous court, wrote, “A taxpayer who loses her $40,000 house to the State to fulfill a $15,000 tax debt has made a far greater contribution to the public fisc than she owed. The taxpayer must render unto Caesar what is Caesar’s, but no more.”

More often than not, Montigny said, “What we’ve found is that almost everyone who went through this [process] was in some way physically or mentally vulnerable. They didn’t just make a choice. Many of them were just overwhelmed.”

Municipalities have defended taking surpluses on the grounds that it costs them money to take over and then dispose of tax-delinquent property. But the Supreme Court’s ruling clearly ruled out the practice. And in Massachusetts many cities and towns off-load the debt collection job and its lucrative proceeds to private collectors.

Last month, taking a cue from the US Supreme Court, Superior Court Judge Michael Callan, sitting in Hampden County, ruled in a case involving a young Springfield mother that similar practices here violate Article 10 of the Massachusetts Declaration of Rights in addition to the Fifth Amendment of the US Constitution.

The Springfield case was brought by the Pioneer Public Interest Law Center and Greater Boston Legal Services, on behalf of Ashley Mills, 26, who, according to Pioneer, lives with her 2-year-old son and disabled mother in the home she inherited from her grandmother “that is her only financial asset.”

Mills’s troubles began in 2016 when she was unable to pay $1,636.70 in property taxes owed to the city. By 2023, the tax bill mounted at 16 percent interest — a rate Pioneer rightly called “punitive” — and other charges totaled some $22,000. The City of Springfield moved to foreclose on the property last May, which would mean that to settle her $22,000 debt, she would lose a home worth some $227,000 at today’s prices.

While conceding that seizing the entire value of a home might sometimes be legal — for instance if debts owed exceeded the value of the property — the judge ruled this was not one of those times. Taking the entire value of the home is unconstitutional in situations “such as here, where the tax debt is less than the value of the property,” Callan wrote. That was good news for Mills.

But the judge also wrote, “The statutory scheme, in its present form, is untenable and requires Legislative correction.”

Enter Montigny with a vow to not let another legislative session go by without action.

“It’s always either inertia or special interests that keep bills like this from passing,” the New Bedford Democrat said. “In this case it’s both.”

Legislation he filed at the start of the session would curtail the ability of municipalities — or the private firms that often make a killing by buying up tax debt — to collect more of the homeowner’s equity than is actually owed. It would also reduce the current 16 percent interest rate and prohibit foreclosures where the debt is less than 10 percent of the assessed value.

The Legislature’s Joint Committee on Revenue is drafting its own bill and keeping some version of the idea alive (a copy of the redraft was not yet available). But with the Senate version of the state budget up for debate beginning May 20, no one would be shocked if a version of Montigny’s bill was proposed as an amendment to the must-pass legislation.

Massachusetts lawmakers have known for more than a year that the way it has allowed cities and towns to literally confiscate properties for tax debts that accumulate in large part because of usurious interest rates is simply against the law — not to mention morally bankrupt. And yet the Legislature has failed to correct the situation. Now that Callan has said, quite clearly, the courts cannot fix this except case by case, legislative action is imperative. It’s also the right thing to do.