SCOTUS Considers Constitutionality of State Tax Foreclosure Practices

Tax attorney Jennifer Karpchuk was quoted in a Thomson Reuters article covering U.S. Supreme Court oral arguments in Pung v. Isabella County, a case that could significantly affect how states conduct tax foreclosures and what constitutional protections apply when a property is seized and sold to satisfy unpaid taxes. The dispute centers on whether Michigan's foreclosure and auction procedures – which can result in sales at depressed prices and the loss of substantial homeowner equity for relatively small property tax debts – violate the Fifth Amendment's Takings Clause and/or the Eighth Amendment's Excessive Fines Clause. Ms. Karpchuk noted the case highlights tension between the way some foreclosure auctions are structured and the operational challenges counties would face if required to secure fair market value in every sale.

"Multiple justices recognized that the foreclosure and auction process, specifically in Michigan, can depress prices through procedures such as cash-only requirements and no property inspections," she said, adding that some also "expressed discomfort with a system that allows a government to destroy most of a homeowner's equity to collect a trivial debt."

Ms. Karpchuk also produced a Holland & Knight Real Estate Unlocked podcast episode on this case.

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