U.S. Supreme Court vacates 2 Nebraska decisions on ‘home equity theft’

OMAHA, Neb. (WOWT) - The U.S. Supreme Court has sent two cases back to the Nebraska Supreme Court regarding the concept of “home equity theft.”

“Home equity theft” is a term commonly used to describe when a homeowner falls behind on tax payments and the government seizes the entire home’s value.

Nebraska is one of 12 states with laws allowing some form of the practice. In Nebraska, if someone falls behind on property tax payments, the county treasurer offers up the outstanding tax liens to private bidders each March.

Two instances of this practice made it to the Nebraska Supreme Court, where the court ruled in favor of the government. On Monday, those two cases were vacated - or sent back to the lower courts - by the U.S. Supreme Court.

The decisions come following a recent decision on Tyler v. Hennepin County, in which a Minnesota woman fell behind on tax payments and the county government sold her home. In that decision, all nine justices agreed that the concept of home equity theft violates the Takings Clause of the U.S. Constitution.

“We believe the US Supreme Court’s decision in Tyler means that Nebraska’s tax sale process is unconstitutional,” said Jennifer Gaughan, Legal Aid of Nebraska’s Chief of Legal Strategy.

The two cases in Nebraska that have been sent back to the state’s Supreme Court involved Kevin and Terry Fair of Scottsbluff, and Sandra Nieveen of Lincoln.

According to Legal Aid of Nebraska, Kevin Fair stopped working to take care of his wife Terry. The couple fell behind on property tax payments and owed $5,268 in back taxes to the county. Private investors then paid off the $5,268 and kept the home’s remaining equity as profit. Fair lived in the home, valued at $60,000, for nearly 20 years.

The other case involving Sandra Nieveen of Lincoln saw Nieveen’s $61,900 home transferred to a private investor over a tax debt of less than $4,000.

In both cases, the Nebraska Supreme Court ruled the process as constitutional but issued staying orders pending the outcome from the U.S. Supreme Court. As a result of the staying order, both homeowners were allowed to stay in their homes until the cases were decided.

The Nebraska Legislature recently passed LB727 unanimously. The bill includes provisions ensuring homeowners receive compensation for any equity in their property and are provided notice of any tax delinquency, as well as the right to redeem the property early in the process.

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