Massachusetts House passes Home Equity Legislation

BOSTON – State Representative Richard M. Haggerty (D-Woburn) was pleased to join his colleagues in the House of Representatives to pass “An Act relative to municipal tax lien procedures and protections for property owners in the Commonwealth,” which would align current statute with a recent decision by the U.S. Supreme Court. The legislation secures the rights of property owners to reclaim any excess equity to which they are entitled after all taxes and fees are repaid to the municipalities following a tax foreclosure, while substantially increasing notifications and other protections for property owners throughout the foreclosure process.

“This important piece of legislation provides crucial protections for homeowners against bad-faith collectors who have exploited an unfair tax lien foreclosure process – a practice deemed unconstitutional by the U.S. Supreme Court,” said Representative Haggerty. “Not only are we complying with the court rulings and providing clarity to towns and cities on tax lien procedures, but more importantly, we are protecting the hard-earned home equity that homeowners have built over the years.”

The Supreme Court’s decision in Tyler v. Hennepin County, Minnesota deemed that state laws allowing municipalities to retain equity from a foreclosed property, in excess of any taxes and fees owed by a property owner, were unconstitutional under the Takings Clause of the Fifth Amendment of the U.S. Constitution. This ruling had an impact on the municipal tax lien foreclosure process in the Commonwealth, since Massachusetts law also allowed municipalities or third parties that purchased tax liens to keep excess equity following a property foreclosure for unpaid taxes. Underscoring the need for legislative action, a recent ruling by the Massachusetts Superior Court (Ashley M. Mills v. City of Springfield) found that the property foreclosure process in Massachusetts was unconstitutional, a ruling that was supported by legal briefings from the Massachusetts Attorney General’s Office.

This legislation ensures that Massachusetts law is constitutional throughout all municipalities in the Commonwealth, and fair to those subject to municipal tax lien foreclosure proceedings. This bill includes the following:

  • Requires that a detailed accounting be taken following a foreclosure in a tax taking of the excess equity that is available;
  • Any excess equity must be returned to the former owner within 60 days;
  • Allows for retroactive claims for excess equity from May 25, 2023, until date of passage;
  • Updates notice requirements where the subject property is residential;
  • Allows former owners the opportunity to file a claim in Superior Court if there is a dispute on the amount of excess equity owed;
  • Increases the maximum length for repayment agreements for owed taxes from five to 10 years;
  • Decrease the amount for a down payment for the repayment agreements from 25 percent to 10 percent and;
  • Establishes a special commission to conduct a comprehensive study relative to the current law and practices around the collection of delinquent property tax revenue by municipalities in the Commonwealth.

Having passed the House of Representatives 154-0, the bill now goes to the Senate for its consideration.

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