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Losing a home for unpaid taxes often means losing your equity, too

Elaine S. Povich, Stateline.org on

Published in Home and Consumer News

Last year, Massachusetts Democratic state Reps. Tommy Vitolo and Jeff Roy saw a newspaper story about two brothers in their state who had almost lost their home due to unpaid property taxes. That was followed by another article this year featuring a New Bedford woman, recovering from COVID-19, who slept in her car when her home was taken for the same reason.

While relatively rare, the plight of the homeowners highlighted in those stories is not confined to Massachusetts.

About a dozen states allow homeowners who don’t pay their property taxes to lose not only their houses, but also the years of payments they have made on the property, known as equity, according to the Pacific Legal Foundation, a libertarian group that has filed suit on behalf of many homeowners in this position, including those in Massachusetts.

Sometimes the local governments take over the properties; other times the municipalities sell the liens on those unpaid bills to private investors who can then foreclose.

To the lawmakers, it didn’t seem fair.

“This seemed like the kind of thing we could fix,” Vitolo said in an interview. He and Roy filed a bill to increase the required notices to homeowners — some, in person — to make it harder for a notice to slip by, or at the very least give the homeowner the opportunity to collect their equity in the property after a sale, provided all the taxes, fees and interest have been satisfied.

 

The bill got little traction this year amid more pressing priorities spurred by the pandemic, Vitolo said, but the two lawmakers plan to revive it in January.

In many states, homeowners who are evicted and lose their homes for failing to pay property taxes are given the profits of the home’s sale, after taxes and interest are taken care of. But in others, homeowners walk away with nothing.

Opponents of the practice include AARP and conservative groups such as the National Taxpayers Union, the American Legislative Exchange Council, known as ALEC, and the libertarian Pacific Legal Foundation.

“At the heart of the matter, it’s the government taking more than it’s owed from citizens it’s supposed to be serving,” said Gretchen Baldau, ALEC’s director of its commerce, insurance and economic development task force. “People owe property taxes, they should pay their property taxes, but this is an issue of fairness.”

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