Tax forfeiture surplus

A tax forfeiture surplus is the amount by which the value of forfeited property exceeds what was owed on it.

Until recently, Minnesota kept it. That changed, and the change is one of the few genuinely new things in this area of law.

What used to happen#

Under the previous statutory scheme, where forfeited property was sold, proceeds in excess of the tax debt and the costs of sale remained with the county, to be split between the county, the town and the school district.

The former owner had no opportunity to recover it.

Geraldine Tyler's Minneapolis condominium is the case that made this concrete. About $15,000 was owed in taxes, interest and penalties. The county sold the property for $40,000 and kept the $25,000 difference.

What changed#

In Tyler v. Hennepin County, decided in May 2023, the Supreme Court held that she had plausibly alleged the retention of that excess violated the Takings Clause of the Fifth Amendment.

Minnesota's statutory notice now reflects it. The notice of expiration of redemption tells owners that if the parcels forfeit and are sold, and the proceeds exceed the delinquent taxes, special assessments, penalties, interest and costs assigned to those parcels, they may be entitled to the excess proceeds.

It is not automatic#

The entitlement exists. Receiving the money is a separate matter.

There is a procedure, there are deadlines, and there are questions about how the surplus is calculated that get contested in individual cases.

Anyone with a potential claim should treat it as a claim to be made rather than a payment to await, and should get advice rather than estimating the figure themselves.

Historic forfeitures#

For property forfeited before the decision, a class settlement covers forfeitures within defined periods, with claim windows that differ by county.

Whether a particular forfeiture falls inside a covered window depends on which county it was in and when it happened. That is checkable, and it is worth checking — the amounts involved are substantial and the people affected are frequently unaware.

Why so few claims get made#

The population affected by tax forfeiture is, almost by definition, the population least likely to hear about a remedy.

Forfeiture concentrates in inherited property nobody probated, in parcels held by absentee or untraceable owners, and in households that stopped opening the post years earlier. Many former owners do not know the forfeiture happened, let alone that a surplus existed or that a claim window is running.

For anyone who discovers that a family property was forfeited, establishing whether a surplus arose and whether a claim remains available is worth doing promptly. The window is not indefinite.