Summary
SB-964 brings California and its counties into compliance with the ruling by the Supreme Court in Tyler v. Hennepin County.
Background
Under current law and practice in California, a residential property found to be delinquent on its property taxes for five years can be sold either to a government / nonprofit housing organization (Chapter 8) or to the public via auction (Chapter 7). In either of these methods, the government is seeking to recapture the defaulted tax revenues from the property.
Through the Chapter 8 process, public agencies and nonprofit housing organizations can identify interest in the property and negotiate a price for purchasing the property. This price has a few guidelines mainly centered on recouping as much of the defaulted taxes as possible. The Chapter 7 process places the property up for public auction at the base price of the defaulted taxes. Through the auction process, the property can be sold for a higher value, leading to equity for the original owner to collect (minus the cost of conducting the auction).
On May 25, 2023 the United States Supreme Court found in the case of Tyler v. Hennepin County, that Ms. Tyler having her property taken and auctioned for a tax default of $15,000, the surplus equity of $25,000 that the county kept was violating the constitutional rights of Ms. Tyler for just compensation.
The common law for just compensation of property, even under the seizure for recovered taxes, dates all the way back to the 13th century which stated that the ‘surplus’ of any seizure was to “be immediately restored to the owner.” This principle gave rise to our own 5th Amendment in the Constitution as the ‘Takings Clause.’
Proposal
SB-964 will bring California into compliance with the Supreme Court ruling and further protect our counties from litigation.