There is cause for celebration in North Dakota, as it joins the growing list of states that forbid home equity theft.
Until recently, local North Dakota officials could seize and sell valuable properties when the owners fall behind on property tax payments and then keep all the profits as a windfall. The owners? They get nothing.
Until April, the repugnant practice was legal in North Dakota. But thanks to the leadership of courageous state legislators and a forward-looking governor, a new law took effect April 23 that bars local officials from employing this abusive form of governmental theft.
To understand how it works, consider the case of Kevin Juhl of Drayton, who was out of state on a long freight haul when his wife called, sobbing. She told him that Pembina County officials had taken title to their home and were preparing to auction the property. The Juhls had fallen a couple of years behind on their property taxes, which run around $575 per year. They planned to pay it back with interest but lost track of the deadline.
To their shock, state law allowed the county to take full ownership of their property—including all their hard-earned equity. And the county demanded they pay $45,000 to get their home back.
Kevin was stunned that county officials could take the home he and his family had worked so hard to buy over such a small debt and with little warning.
“We are hardworking people who pay our share,” he said. “It felt like a setup.” But their story is just one of many.
Most states sell tax-delinquent property in auctions to the highest bidder and use the proceeds to pay all taxes, penalties, interest, and costs. Any leftover money belongs to the former owner.
North Dakota was among only a dozen states allowing the government to take more than it is owed. Property owners who owed back taxes were at the mercy of predatory local officials who would swoop in, seize their homes, and auction off the homes for cash. The owners got nothing, regardless of how much equity they might have held in the property.