DEBORAH FOSS, a 66-year-old disabled retiree, used her life savings in 2015 to buy a two-family house in New Bedford. A year later, dealing with medical and financial problems and tenants who stopped paying rent, Foss fell behind on her property taxes.
According to a court brief filed by Foss, by 2018, her debt had accrued to $9,626. New Bedford sold the tax lien to a private company, Tallage Davis, which initiated a foreclosure. Foss appeared in court and asked for a payment plan, but she could not afford a lawyer, and her request was dismissed. Tallage charged her 16 percent interest, and when she could not pay nearly $25,000 in 2019, it foreclosed on her home and evicted her on February 1, 2022, according to court documents.
Foss is now homeless and living in her car. Tallage sold her house for $242,000 – keeping a profit of $210,000 more than Foss’s debt.
The California-based Pacific Legal Foundation is using Foss’s case to challenge a Massachusetts law that lets a municipality seize a property due nonpayment of property taxes, then sell the property and keep any profit above the amount owed. (Municipalities often sell tax liens to for-profit companies like Tallage, which then sell the property.) The foundation filed a lawsuit on Foss’s behalf Tuesday in Suffolk County Superior Court.
“Instead of returning the extra $210,000 equity that I had, Tallage took my home and kept the equity I had in it, leaving me with absolutely nothing,” Foss said, speaking to reporters outside the Suffolk County courthouse on Tuesday. “I understand the government trying to settle debts that I owe, but giving away my home and all the money I held in it is cruel and wrong.”
While the case is drawing attention from lawmakers and advocates who are seeking to change what they see as an unjust law, Tallage says the facts of the case are more complicated.
Daniel Hill, an attorney for Tallage, said no property taxes were ever paid on the property since it was bought in 2015, and Foss ignored opportunities to pay the back taxes. Hill said Tallage tried to work with Foss and her sister, who was living with her, to get them to leave the house in exchange for a monetary settlement, but the sisters defaulted on their agreement. Hill said after an oil spill caused unsafe air quality in the house, Tallage spent $75,000 cleaning up the hazardous waste. Documents filed with the Department of Environmental Protection confirm that there was a failure of a heating fuel storage tank in the basement, resulting in an oil spill.
While Tallage had not seen the lawsuit, Hill said, “Tallage has followed all of the statutory requirements governing the tax lien foreclosure process and the hazardous waste clean-up of the property.”
The issue is one that has been occasionally raised over the years in courts and in the Legislature. CommonWealth reported last year about a similar case involving an elderly man who lost his $254,000 home in Oxford over a $3,056 tax bill. That case centered on the question of whether state law requires adequate notice be given to homeowners when their home is going to be seized. Oral arguments are schedule for next month in that case, which is pending before the state Appeals Court.
The legal issues in Foss’s case provide a more direct challenge to the state law regarding the sale of a foreclosed home. Foss’s attorneys are arguing that letting a municipality, or a company like Tallage, keep the profit from a home after it is sold, rather than paying off the tax lien then returning the equity to the homeowner, is unconstitutional because government is not providing reasonable compensation for the property and is levying an excessive fine.
“When a government takes private property for public use, for example the collection of taxes, it must provide compensation for any property that’s taken above and beyond that tax debt,” said Joshua Polk, an attorney with the Pacific Legal Foundation.
The Pacific Legal Foundation, a libertarian group, has challenged similar laws in Massachusetts and around the country. Polk said there are 12 states with similar laws. A legal challenge on the same grounds by the foundation in Michigan resulted in a state Supreme Court ruling there that overturned Michigan’s law. The foundation’s prior cases in Massachusetts have settled before reaching the Supreme Judicial Court, and Polk said it is too early to say whether this case could potentially become a test case asking the SJC to overturn the state law.
Meanwhile, some lawmakers are hoping the Legislature could change the law on its own initiative. Rep. Jeffrey Roy, a Franklin Democrat, and Rep. Tommy Vitolo, a Brookline Democrat, introduced a bill that would make a tax lien seizure similar to a mortgage foreclosure, where the municipality could sell the property to pay the tax debt, but any additional money from the sale would be returned to the homeowner. The bill would also institute more procedural safeguards to ensure the homeowner is notified about a foreclosure and has an opportunity to contest it in court.
Roy said the bill “would end this practice immediately and restore due process rights to individuals who are affected by these unfair tax takings.”
Municipalities have generally argued against changing the law. Representatives of municipal government say the process of collecting unpaid taxes is already heavily regulated, and there needs to be an incentive for individuals to pay their taxes and a method by which government can recoup the money it loses from properties with long-overdue tax bills.