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A Nebraska man nearly lost his home and assets over a small tax debt. But he won in court.
Idaho

A Nebraska man nearly lost his home and assets over a small tax debt. But he won in court.

Kevin Fair has been dealing with the harsh reality for years: He is on the verge of having his house and all his assets seized because he has accumulated a small amount of property tax arrears. The Nebraska Supreme Court ruled last week that this was unconstitutional.

That such a decision had to be made may sound grim, but the absurdity of this statement is overshadowed by the fact that he almost lost.

Fair knows the loss. In 2013, he quit his job to care for his wife, Terry, who had been diagnosed with multiple sclerosis. Because the Fairs were living on his Social Security, they were unable to pay their 2014 property tax bill. That $588 debt set off a chain of events that eventually led to the Scotts Bluff County government giving the deed to their home to a private investor.

In 2015, investor Continental Resources quietly bought the Fairs’ tax debt and continued to pay the bills to the state. Then in 2018, the company sent the couple the dues: $5,268 for the past-due taxes, along with penalties, interest and fees. If they couldn’t pay within 90 days, the company had the right to take the house to pay off the debt.

The profit should also remain for the shareholders.

The latter claim sparked a legal odyssey in which the Fairs challenged the legality of the Nebraska-sanctioned theft of home equity as the family sought to keep their home. The value of the home – about $60,000 – far exceeded their total debts. Yet under Nebraska law, it was OK for investment firms to pocket the excess equity, meaning the Fairs were forced to pay another $55,000 since they were unable to pay off a $5,268 balance.

This was commonplace in Nebraska when people fell behind on their property taxes. “People are shocked at how the law actually works,” says Jennifer Gaughan, director of legal strategy at Legal Aid of Nebraska, which is representing Fair. told I last year. “It’s usually older people… people who own their home outright and don’t have a mortgage, and usually there’s some sort of incident. It’s not just poverty. It’s illness or something happens in their life… And then they don’t know about it. And then (the house) gets taken away from them.”

But the Fairs’ lawsuit failed – multiple times. The couple lost in state court, after which Fair’s wife died. So he appealed alone to the Nebraska Supreme Court, which also ruled against him in 2022, causing him to lose his house and all of its value.

Enter the U.S. Supreme Court, which ruled unanimously last year that home theft violates the Fifth Amendment’s Taking Clause, which says the government cannot take private property without just compensation. The justices were hearing the case of Geraldine Tyler, an elderly woman whose condo was seized by Hennepin County in Minnesota because she owed $2,300 in property tax debt. The final bill was $15,000 when you add in penalties, interest and fees. But when the state sold her home for $40,000, it kept the extra $25,000.

“A taxpayer who loses her $40,000 home to the state to pay off a $15,000 tax debt has made a far greater contribution to the state treasury than she owed,” Chief Justice John Roberts wrote for the court’s unanimous ruling. “The taxpayer must give to Caesar what is Caesar’s, but no more.”

The Nebraska Supreme Court’s latest reversal came in response to the U.S. Supreme Court’s decision, which ordered the state’s justices to reconsider their original ruling on Fair’s claims. This time, they concluded that keeping Fair’s excess equity would violate the expropriation clause, which requires the investor to reimburse him for the excess. Whether a deal will be reached that allows Fair to stay in his home remains unclear.

Although the U.S. Supreme Court’s decision last year should have made this rule universal law, some states — including Arizona, Alabama, New York and New Jersey — have tried to find ways around it, creating labyrinthine requirements that put the burden on homeowners to fight back for their equity after foreclosure.

Chelsea Koetter, for example, lost her home in Michigan because of a $3,863.40 tax debt. She made a mistake during the state’s complicated process for claiming her assets, so the state denied her claim and seized the full value of the home. The gain was $102,636.

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