AUGUSTA, Maine — Last week’s U.S. Supreme Court ruling in favor of a Minnesota woman who saw the government profit off the sale of her seized condo could force Maine and other states to change laws.
But Maine lawmakers are moving cautiously.
The Legislature’s tax committee Tuesday tabled a bill from Rep. Chad Perkins, R-Dover-Foxcroft, that would require municipalities to largely stop the practice of keeping excess proceeds from the sale of tax-delinquent properties.
With only two more committee work sessions scheduled this week before the Legislature shifts its focus to passing a final budget by late June, it appears legislators may not approve any legal changes until next year at the earliest.
Towns are allowed under Maine law to keep the extra money from tax-delinquent property sales, with about a dozen other states also permitting the practice.
In the Supreme Court’s unanimously ruling in favor of a Minneapolis woman who lost her condo over a $15,000 tax bill and then saw Hennepin County keep the extra money after selling it for $40,000, the justices found the county violated the 94-year-old woman’s Fifth Amendment rights by taking her property without paying “just compensation.”
The Pacific Legal Foundation, a conservative group that represented the Minnesota woman, describes the laws in Maine and eleven other states along with Washington, D.C., as “home equity theft.” (Nine additional states permit the practice in “limited circumstances,” the foundation said.)
From 2014 to 2021, it found 43 Maine homes were taken this way, with owners losing $167,000, or 88 percent, of their equity on average.
Lesley S. Harris was one of those homeowners. She lived year round on Swan’s Island off Maine’s rocky coast for about two decades until her husband, Bob, died in 2013.
Harris, 55, moved to Escondido, California, to live with her ailing mother after Bob’s heart disease-related death and only returned to the island for part of the year.
Five of her former dogs — Honeybunch, Lily Anne, Daphne, Spot and Ellie — are still buried in the yard.
In 2019, the town of Swan’s Island sold her home after claiming it due to more than $30,000 in unpaid taxes and then sold it for several thousands more, with Harris receiving none of the surplus proceeds.
“We lived from paycheck to paycheck and were barely able to make ends meet,” Harris said, acknowledging she was behind on taxes and the property fell into rough shape after she began spending more time in California to care for her mother, who is now 93.
Harris hopes the Supreme Court ruling makes Maine and other states change laws so that other homeowners avoid what she experienced.
“It wasn’t a perfect house, but it was home. I do have to go back to [Swan’s Island] because I have storage space there,” Harris said. “But I’m still emotionally torn up about it.”
Under the bill from Perkins, if homeowners fail to claim the surplus funds within 90 days, then the local governments could keep the money. The bill has only Republican cosponsors but also the support of the legal aid group Pine Tree Legal Assistance and Maine Credit Union League.
The administration of Gov. Janet Mills, a Democrat, has cited technical concerns about the bill but agreed with its mission in testimony.
“My gut feeling is now that we’ve gotten the [Supreme Court] decision, there will be positive action on the bill,” Perkins said before Tuesday’s committee meeting. “If they don’t advance the bill, the state’s only opening itself up to litigation later.”
Still, Rep. Joe Perry, D-Bangor, the tax committee chair, said, “I just worry we’re gonna make a terrible mistake if we try to move this within the next two days.”
As legislators held the bill in committee, the Pacific Legal Foundation sent a letter Tuesday to Maine and other states warning them of the cost of inaction.
“If these states don’t change their laws to comply with the Court’s ruling, they could face damages in the millions in future lawsuits,” Jim Manley, the foundation’s state legal policy deputy director, said.
The question over whether governments should keep the surplus proceeds of seized home sales previously arose in Maine in 1974, when the Maine Supreme Judicial Court upheld the state’s foreclosure-related law, and in 2018, when former Gov. Paul LePage expressed support for an Albion couple whose home was seized over $4,000 in unpaid taxes.
Kate Dufour, a lobbyist for the Maine Municipal Association, said its legal services department has issued guidance to members on the Supreme Court’s recent ruling and that “change is necessary.”
Dufour said she looked forward to working with lawmakers on a “solution that brings Maine law into compliance with the Supreme Court ruling while protecting the interests of all other property owners left to bear greater burdens when taxes go unpaid.”
“At the end of the day, there are people in our communities who are paying more because someone else cannot,” Dufour told Taxation Committee members, who requested more information from the attorney general’s office on whether a statute of limitations exists for homeowners who previously did not receive excess home foreclosure proceeds.
