Minnesota lawmakers pass reforms to property forfeiture law

When the legislative session ended in chaos late Sunday night, some high-profile bills were left on the table, including a bonding bill and the equal rights amendment.

However one less glamorous but important piece of legislation made it through: reforming Minnesota’s process for handling tax-delinquent property. That fix was needed because a U.S. Supreme Court decision last year declared Minnesota's current system unconstitutional. 

The high court decided Hennepin County violated the constitutional rights of Geraldine Tyler, a Minneapolis resident in her 90s. Hennepin County sold Tyler’s condo for about $25,000 more than she owed in property taxes and fees, and kept the difference. The Supreme Court ruled she was entitled to the excess money. 

As a result lawmakers were under pressure to reform Minnesota’s forfeiture laws quickly. They needed to come up with a solution that passes the constitutionality test, so it won’t be subject to future lawsuits.

“What the previous system did upon foreclosure was just keep the property or sell the property, and that was that,” said Rep. Sandra Feist, DFL-New Brighton, the lead House author. “There was no effort to return any surplus proceeds to the property owner."

Feist said it was important that the new law create a process after a forfeiture to return that excess money to the homeowner, and to make sure property owners receive clear notice about what's happening to their property and how they can claim that surplus.

The new language was tucked into a massive omnibus bill that lawmakers passed Sunday, just before the midnight deadline. It was a long process to get to the final version, with the bill going through multiple revisions during the session.

The new process requires that almost all tax-forfeited property be offered for sale at a public auction. The county will calculate a minimum bid for the property by adding up the delinquent taxes, penalties, special assessments and other costs.

If it sells for more than the minimum bid, the counties are required to notify all interested parties — including the prior owner — so they can file a claim and collect that surplus.

It also strengthens the requirements for counties to notify owners that their property is in forfeiture, and let them know about property tax relief programs for which they might be eligible. 

Lawmakers had the daunting task of coming up with a solution that would satisfy groups as diverse as the AARP, Legal Aid and the libertarian Pacific Legal Foundation, which represented Geraldine Tyler.

“I think it does a really good job of making some really good clarifying changes to the process, and providing good guidelines to the counties, while also protecting property owners rights,” Kileen Lindgren, the foundation’s legal policy manager, said earlier this month.

In fact, Lindgren said the bill could be a model for other states that are working to revise their forfeiture laws in the wake of the Tyler decision.

Counties are also OK with the bill, although they will no longer be able to recoup excess money from the sale of tax-forfeited property. 

They've long argued forfeiture isn’t a money-maker for them, because these delinquent properties are often in disrepair, and it takes a lot of money and effort to get them ready to resell.

Matt Hilgart, a lobbyist for the Association of Minnesota Counties, said counties didn’t get 100 percent of what they wanted, and are concerned about some late additions, including a quick turnaround time the bill demands for them to administer this new system. 

But Hilgart said counties are glad the Legislature did take action to create a new, constitutional process for Minnesota going forward, and provided a way for people who lost out under the past system to be compensated.

Earlier, lawmakers passed a separate bill designating $109 million to settle class-action lawsuits filed against Minnesota counties after the Tyler decision. Gov. Tim Walz signed it into law.

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