A new law could allow the owners of properties that are sold during tax foreclosures to receive some extra money back.
Maine is one of a dozen states where municipalities are not required to return any excess proceeds to most owners after a property has been sold through a tax lien foreclosure.
But in May, the U.S. Supreme Court ruled unanimously in favor of a woman who had sued a Minnesota county for selling her property for more than double what she owed in taxes and then refusing to give back the difference. The justices found the county’s actions had violated the Fifth Amendment’s “takings clause,” which states that private property cannot “be taken for public use without just compensation.”
Rep. Chad Perkins, a Dover-Foxcroft Republican, said he introduced his legislation to change the law in Maine before the U.S. Supreme Court agreed to hear the Minnesota case. Under a law enacted in Maine in 2015, homeowners who are 65 or older and met certain income thresholds were already eligible to receive the excess proceeds from a municipal tax foreclosure.
Perkins said his bill aimed to help ensure that people who undergo a tax foreclosure — for whatever reason — are not necessarily "starting out at zero" after the sale. And Perkins points out that banks and mortgage companies are already required to return any excess money after a private foreclosure.
"So to me there was a disparity between what a town can do as someone who foreclosed on a property and a private mortgage holder who foreclosed on a property. So we were just trying to bring some parity to that so that someone who had a foreclosure from a municipality was on the same footing as someone who had a foreclosure from a private mortgage," Perkins said.
The Maine Municipal Association initially raised concerns about the bill, particularly about how it would be administered. But Perkins worked with the bipartisan members of the Taxation Committee and the MMA to change the bill to ensure towns and cities could recover delinquent taxes as well as other costs incurred while maintaining or selling the property.
Gov. Janet Mills signed the bill into law last week. And because it was passed as an “emergency measure,” the bill took effect immediately.
“That’s the kind of thing that should happen down in Augusta,” Perkins said. “When people see that something has to be done, everybody comes together and works together to make sure that we get a good law passed. Rather than fighting back and forth . . . everybody worked together to get the right bill passed.”
