Constitutionality of Tax Sale Practices Questioned

The Lanser Case

The property at issue in Lanser is in the Village of Rockville Center, which had adopted a local law authorizing it to continue tax lien sales in accordance with former title 3 of article 14 of the Real Property Tax Law. When the property’s owner defaulted on its real estate taxes, the village held a public auction of a tax lien, and a purchaser obtained a tax lien certificate. More than two years after purchasing the tax lien, the purchaser served a notice of redemption on the former owner, who failed to redeem within the statutory six-month period. The village then entered a treasurer’s deed to the tax lien purchaser, who recorded the deed and then brought an action to quiet title. Supreme Court initially granted summary judgment to purchaser, provided that former owner failed to redeem within 90 days. Purchaser moved to reargue the conditional nature of the order granting former owner additional time, but Supreme Court responded by denying the purchaser’s summary judgment motion. Purchaser appealed.
The Appellate Division modified, holding first that the tax lien purchaser had complied with the relevant statutory procedures and was entitled to summary judgment under then-applicable New York law. But the court noted that after Supreme Court’s decision in the case, the United States Supreme Court decided Tyler v. Hennepin County, 598 US 631, invalidating certain tax sale practices. The court remitted for consideration of the constitutional taking claim after proper notice to the village and the state attorney general.

Tyler v. Hennepin County

In Tyler, the United States Supreme Court invalidated a Minnesota procedure that permitted the county to keep any surplus proceeds generated by a tax foreclosure sale. Mrs. Tyler’s failure to pay taxes on her condominium led to an accrual of $2,300 in unpaid tax and $13,000 in interest and penalties before the county sold the unit for $40,000, keeping the $25,000 surplus. When Mrs. Tyler sued, the district court and the eighth circuit upheld Minnesota’s forfeiture procedure, but the Supreme Court reserved, holding that Mrs. Tyler had stated a taking claim when the county retained more of her property than necessary to satisfy her tax debts.
In the course of his opinion, Chief Justice Roberts distinguished Tyler from Nelson v. City of New York, 352 U.S. 103, in which the Court sustained a New York City procedure that allowed the city to retain a surplus in f the owner filed an answer in the foreclosure proceeding asserting that the property had value beyond the tax due. In Tyler, the Court explained that the New York City ordinance did not work a taking because it simply defined the process through which the owner could claim a surplus.