The Nebraska Supreme Court. (Aaron Sanderford/Nebraska Examiner)
LINCOLN — In what Legal Aid lawyers are calling a “historic about-face,” the Nebraska Supreme Court on Friday ruled in favor of two different elderly homeowners who fell victim to what critics described as government-assisted home equity theft.
The homeowners, represented by Legal Aid of Nebraska and Pacific Legal Foundation, claimed that Nebraska’s delinquent tax sale process was unconstitutional in that it allowed homeowners to lose more than what they owed to satisfy property tax debts.
“The Nebraska Supreme Court (today) held that home equity is protected by the Constitution and that the government cannot take more than what is owed,” said Christina Martin, senior attorney at Pacific Legal Foundation, which teamed with Legal Aid to represent the Nebraskans.
Investors kept the profit
One of the cases involved Kevin and Terry Fair, who lived in their Scottsbluff home for nearly three decades but fell behind on taxes after she got sick and he stopped working to care for her (she died during litigation). The county eventually transferred the couple’s $60,000 home to a private investor, who paid off the Fairs’ $5,268 county debt and kept the profit.
In the second case, Sandra Nieveen had lived in her Lincoln residence for a half-century when the county transferred the $61,900 home to a private investor for a tax debt of less than $4,000.
In both cases, the Nebraska Supreme Court originally upheld state laws, prompting Pacific Legal and Legal Aid to ask the U.S. Supreme Court for a review.
Last May, the U.S. Supreme Court ruled in a separate but similar case, Tyler v. Hennepin County, that if the government takes more than what is owed to satisfy a property tax debt, it violates the Fifth Amendment’s “takings clause.”
That sent the Fair and Nieveen cases back to the Nebraska Supreme Court for reconsideration. Friday, Nebraska justices determined that investment companies who bought the tax liens must pay Fair and Nieveen for the excess equity that remained after their property tax debt was satisfied. The cases were returned to the trial court to determine how much the homes are worth and how much compensation is owed.
“The Court’s rulings today solidify that, pursuant to the takings clause of the United States and Nebraska Constitutions, just compensation must be paid to homeowners when the value of their property taken is worth more than what is owed to satisfy the tax debt,” said Jennifer Gaughan, Nebraska Legal Aid’s chief of legal strategy. “These tax sales laws harm the elderly, sick and poor the most — with a disproportionate impact on people of color.”
Martin said her team is thrilled that after years of litigation, the Nebraska court recognized the homeowners’ right to their hard-earned equity.
“This is a win for all Nebraskans, who can now sleep soundly knowing their home equity belongs to them and to them alone.”
NE law changed last year
Last year, the Nebraska Legislature amended the state’s delinquent tax sale laws that were challenged in the Fair and Nieveen cases. The changes went into effect in September 2023, preventing future scenarios of home equity theft by requiring tax lien investors to pay the original owner any remaining equity after the delinquent taxes, interest, penalties, fees and other liens on the property have been satisfied.
Here is how it had worked in Nebraska prior to the changes: Counties could sell the tax lien on a property to a third party, who would pay a homeowner’s overdue taxes. After three years of paying taxes on the property, the third-party investor could seek the legal deed to the property, although the investor was supposed to notify and give the owner a shot at holding onto the property by paying the delinquent tax and interest.
Happening too often, Nebraska lawmakers said, was that the investor reaped a windfall on the sale, since state law prior to September 2023 didn’t require reimbursement of equity the owner had built up.
Mark Bestul of Legal Aid said the Nebraska Supreme Court’s Friday ruling now provides a clear path to justice for Fair and Nieveen. The court said the investors are liable for reimbursing the the homeowners.
Reason for the law change
State Sen. John Cavanaugh of Omaha, who pushed for changes to Nebraska law, said he was glad the homeowners involved are going to be made whole.
“Cases like this one are the reason for the change we made in the law,” he said. “And thanks to that change going forward, there will not be a need for this type of correction.”
The Pacific Legal Foundation said the decision sends a signal to other states that haven’t yet complied with the U.S. Supreme Court ruling in Tyler “that property owners’ rights must be protected.”
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Publish date : 2024-08-23 13:08:00
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