Tyler v. Hennepin County, Three Years On: What It Means for Surplus Funds and Home Equity

What happened to Geraldine Tyler

Geraldine Tyler owned a condo in Minneapolis. After she moved into a senior community, the property taxes went unpaid. By the time Hennepin County foreclosed in 2015, about $2,300 in back taxes had grown by roughly $13,200 in interest, penalties and costs.

The county sold the condo for $40,000. That more than covered the debt. Under Minnesota's forfeiture law at the time, the county kept the remaining amount, about $25,000, rather than returning it to her. The statute directed those funds to county and local uses.

Tyler sued, arguing that keeping her equity was a taking of property without just compensation. The lower courts ruled against her. The Supreme Court agreed to hear the case.

What the Supreme Court decided

On May 25, 2023, the Court ruled unanimously for Tyler. Chief Justice Roberts wrote that the county had the power to sell the home to recover the unpaid taxes, but it could not use the tax debt to confiscate more property than was due. Keeping the surplus was a taking that required just compensation under the Fifth Amendment.

The Court also rejected the idea that a state can simply define the property right away. State law is one source of property rights, the opinion said, but it cannot be the only one, or a state could sidestep the Takings Clause by disavowing traditional property interests.

The practical result is simple. After a tax sale, whatever the sale brings in above the debt and lawful costs belongs to the former owner, or to lienholders who rank ahead of the owner. A county cannot keep it as a windfall.

Which states were affected

Most states already returned tax sale surplus to owners before Tyler. A minority did not. According to research by the Pacific Legal Foundation, which represented Tyler, 22 states and the District of Columbia had laws on the books that allowed governments or lienholders to keep surplus equity when the case was decided. The states named in that research as having home equity theft laws included Alabama, Arizona, Colorado, Illinois, Maine, Massachusetts, Minnesota, Nebraska, New Jersey, New York, Oregon and South Dakota, along with the District of Columbia. Practices varied. Some places exempted single-family homes or seniors, and in some places counties waited until interest and fees had eaten the equity before foreclosing.

The same research found that from 2014 to 2023, local governments took at least 860 homes this way, putting close to $800 million in lost equity into government accounts. One case involved a debt of $8.41 that ended in a forced sale yielding $24,000.

The debate over "demand" systems

Not every reform pays owners automatically. Some states responded with systems where the owner must ask, by a deadline, for the surplus or for a public auction, and if they do not ask, the money or the equity goes elsewhere.

The Pacific Legal Foundation argues that these "demand" systems are themselves unconstitutional, because the government has an affirmative duty to pay just compensation after a taking, and courts do not normally presume that people waive constitutional rights by staying silent. It has pointed to Michigan's system, and to proposals in Arizona and Minnesota at the time, as examples it would challenge. Supporters of these systems point to an older Supreme Court case, Nelson v. City of New York, which they read as allowing a claim process.

For owners the practical lesson is the same either way: if you receive a notice about surplus or equity after a tax sale, do not ignore it. File or respond by the deadline, even if you believe the money should come to you automatically.

What changed for surplus funds lists

Tyler created more surplus records, and it changed how they are handled. In states that used to keep the equity, counties now hold it and publish it, often with new notice rules and new claim windows. Several states route unclaimed surplus to the state's unclaimed property program rather than letting it lapse.

That is part of why county lists change so often. New York's 2024 amendments, Minnesota's claim process and Idaho's notice rules all produced new kinds of records with new deadlines. TaxLienSimple checks every list it tracks at least every 48 hours and shows each state's rules on every record, with the date we last read the statute. You can see the current numbers by state on our surplus funds list.

What Tyler means for each group

Former owners. The surplus from a tax sale is yours, in every state, after lienholders ahead of you are paid. Check the county's list, watch for notices, and file by the deadline. You can always claim for free.

Recovery agents. More states now hold and publish surplus, but many also added fee rules, notice requirements and short claim windows. Read each state's current statute before you work it. Our recovery agent guide has a state-by-state table.

Tax deed and tax lien investors. In states that used to give the full property to the lien holder or the government, the investor's return is now limited to the debt, interest and lawful costs, with the equity going back to the owner. That changes the math on deals in those states. Read the reformed statute before you bid, and see our state guides for each state's current rules.

Counties. Counties must now notify owners and hold surplus for a claim period, which adds administrative work but removes a legal risk that cost some governments heavily in lawsuits after 2023.

Frequently Asked Questions

Common questions about Tyler v. Hennepin County.