House approves $109M settlement to return excess proceeds from tax-forfeited properties

State lawmakers are one step closer to approving a settlement for thousands of Minnesotans after the U.S. Supreme Court sided with a Hennepin County woman in a property rights case last year.

The Minnesota House unanimously approved a bill to make $109 million available for counties to settle cases in which county governments seized properties over tax debt, sold them and kept the total proceeds of the sale beyond what was owed in taxes, interest and fees.

The settlement stems from the case of Geraldine Tyler, who moved away from her Minneapolis condo in 2010 and fell behind on property taxes. After interest and penalties, her tax debt climbed to $15,000. Hennepin County seized her condo and sold it for $40,000, keeping the $25,000 extra from that sale.

Tyler’s attorney fought the case, but Minnesota law did not give her any right to that money. Her case made its way to the U.S. Supreme Court, which found the state law unconstitutional under the Takings Clause.

House File 5246, which now heads to the Minnesota Senate, seeks to remedy roughly 6,000 such cases that had accumulated statewide in the past seven years as part of a class-action settlement that was approved by the Attorney General’s Office.

“This legislation creates a framework to responsibly settle damages with those impacted by a prior law that was deemed unconstitutional. The settlement is agreed to by all parties involved and resolving this issue has been a monumental task,” said Rep. Dave Lislegard, DFL-Aurora, one of the bill’s authors in the House.

Rep. Sandra Feist, DFL-New Brighton, co-authored the settlement appropriations bill and also authored a separate bill, House File 4822, that would fix existing state law.

“This legislation funding the settlement agreement represents a critical step forward in moving past Minnesota’s unconstitutional tax forfeiture laws enacted in 1935,” Feist said in a statement. “Through the bill we passed today, the state and counties have agreed on how to financially address the harm caused by our laws. The mechanisms created will ensure that property owners receive compensation, that the state and counties work together to cover the associated cost, and that there is transparency to the claims process. I look forward to presenting the companion bill to replace the existing law with a more just system.” 

HF 4822 would entitle interested parties to the surplus when forfeited properties are sold and would require counties to notify them in such cases. The bill needs a final reading before it goes to the full House for a vote.

Follow the status of those and several other high-interest bills with KSTP’s Legislative Tracker.