HJTA SCORES A VICTORY IN “HOME EQUITY THEFT” CASE

The Howard Jarvis Taxpayers Association helped to prevent Riverside County from taking more than $335,000 in home equity belonging to a resident whose home was sold in a public auction to satisfy a tax debt.

The Riverside County Board of Supervisors was presented with a staff recommendation to deny a valid claim for the excess proceeds of the tax sale. Alerted to the situation by someone working on behalf of the former homeowner, HJTA quickly sent a letter to the Board informing them that the staff recommendation was wrong.

“Whether a county forecloses on tax delinquent properties itself, or requires lienholders to handle such foreclosures, the entity foreclosing may collect the debt with interest, penalties, and reasonable costs associated with selling the property — but nothing more,” HJTA wrote. Calling it “home equity theft,” HJTA warned the Board of Supervisors that a decision to retain the excess proceeds would be a violation of the U.S. Constitution, specifically the Takings and Excessive Fines Clauses.

When a tax or foreclosure sale takes place, the former homeowner must file a claim for the excess proceeds, but in this case, the staff of the Treasurer-Tax Collector’s office contended that the claim was not received and couldn’t be located, and also that a copy of the claim was not filed in time. Therefore, the staff recommended that the county keep the excess proceeds for itself.

That didn’t sit well with the HJTA team. Director of Legal Affairs Laura Dougherty, who wrote a “friend of the court” brief to the U.S. Supreme Court in Tyler v. Hennepin County, a home-equity proceeds lawsuit brought by Pacific Legal Foundation, shared some language from the brief with HJTA Legislative Director Scott Kaufman. “Governments should not be trespassers, but trustees, particularly to tragedy-befallen persons who happen to own a home or other real property that can be used to satisfy a tax debt,” he wrote in the letter to the Board of Supervisors.

The Riverside County Board of Supervisors agreed. The Board rejected the staff recommendation to keep the money, and the former homeowner was awarded the excess proceeds from the tax sale.

There is more work to do on this issue for California homeowners. Last spring, HJTA supported a bill, AB 1839, that would have expanded the window of time to file a claim for excess proceeds and would have enhanced notification procedures. Unfortunately, the bill did not advance.

HJTA continues to work on this issue alongside other groups, including the Pacific Legal Foundation. It is simply wrong for governments to treat the excess home equity of people who sadly lose their homes due to tax debt as the government’s own windfall.