House bill would establish new tax title process

The House yesterday passed a bill to establish a new process for municipalities when they foreclose on a property for unpaid property taxes and the value of the property is greater than the tax debt.

The bill (H. 4801) comes in response to the U.S. Supreme Court decision in Tyler v. Hennepin County in May 2023, which struck down a process similar to what has been used in Massachusetts.

In the case of a foreclosure, the House bill would require a municipality to hold the surplus equity in an escrow account until it can be paid to the former owner. The bill would allow the municipality to deduct a number of carrying costs, including water, sewer and maintenance, as well as costs associated with the appraisal and sale of the property. The bill would allow the municipality to purchase or sell the property after appropriate notice is given, and to sell it by auction after one year.

The bill would expand notice requirements by requiring that the notice be made in several languages and that it be understandable by the “least sophisticated consumer.”

The bill would expand the term length of a payment plan between a municipality and a delinquent taxpayer from five years to 10, and lower the amount of the initial payment required from 25% of the taxes owed to 10%.

The bill would be retroactive to May 25, 2023, the date of the Supreme Court decision, so a former owner, previous holder of a right of redemption, or successors whose property was foreclosed on after that date would be able to file for the return of excess equity.

The bill passed unanimously, and now moves to the Senate.