This Nebraska Man Almost Lost His Home and All of Its Equity Over a Small Tax Debt. He Just Won in Court.

Kevin Fair fell behind on his property taxes in 2014. The local government eventually gave a private investor the deed to his home.

For years, Kevin Fair has been staring down a coarse reality: poised to have his home seized, along with all of its equity, because he accrued a modest debt on his property taxes. The Nebraska Supreme Court last week said that was unconstitutional.

That such a decision needed to be spelled out in the first place may sound dire. The absurdity of that is dwarfed by the fact that he nearly lost.

Fair is familiar with loss. In 2013, he quit his job to care for his wife, Terry, who had been diagnosed with multiple sclerosis. Living on his Social Security, the Fairs were unable to pay their 2014 property tax bill. That $588 debt would set in motion a chain of events that ultimately ended in the Scotts Bluff County government giving a private investor the deed to their home.

In 2015, that investor, Continental Resources, quietly purchased the Fairs' tax debt and continued satisfying the bill with the government. In 2018, the company then sent the couple the charges: $5,268 for the overdue taxes, along with penalties, interest, and fees. If they couldn't pay within 90 days, the company had the right to take the home to pay the debt.

It would also get to keep the profit.

The latter assertion sparked a legal odyssey that saw the Fairs challenge the legality of Nebraska's state-sanctioned home equity theft as the family sought to cling to their house. The value of the home—about $60,000—far exceeded their total debt. But under Nebraska law, it was kosher for investment firms to pocket the surplus equity, meaning the Fairs would be forced to pay an additional $55,000 for their inability to satisfy a $5,268 balance.

This was par for the course in Nebraska when people fell behind on their property taxes. "People are shocked about how the law actually operates," Jennifer Gaughan, chief of legal strategy at Legal Aid of Nebraska, which represents Fair, told me last year. "It's usually elderly people…people who own their homes outright who don't have a mortgage, and there's usually some kind of intervening situation. It's not just poverty. It's illness, or something happens in their lives….And then they don't have notice of it. And then [the home] is being taken."

But the Fairs' lawsuit failed—multiple times. The couple lost in state court, and Fair's wife passed away. So he appealed by himself to the Nebraska Supreme Court, which in 2022 also ruled against him, setting him up to lose his home and all of its value.

Enter the U.S. Supreme Court, which ruled unanimously last year that home-equity theft schemes are a violation of the 5th Amendment's Takings Clause, which promises that the government cannot take private property without just compensation. The justices had heard the case of Geraldine Tyler, an elderly woman whose condominium was seized by Hennepin County, Minnesota, in response to a $2,300 property tax debt. The final tab came to $15,000 when adding penalties, interest, and fees. But when the government sold her home for $40,000, it kept the additional $25,000.

"A taxpayer who loses her $40,000 house to the State to fulfill a $15,000 tax debt has made a far greater contribution to the public fisc than she owed," wrote Chief Justice John Roberts for the unanimous Court. "The taxpayer must render unto Caesar what is Caesar's, but no more." 

The Nebraska Supreme Court's recent about-face came in response to that decision from the U.S. Supreme Court, which ordered that the state's judges reconsider their initial ruling on Fair's claims. This go-round, they concluded that pocketing Fair's excess equity would be a violation of the Takings Clause, requiring that the investor reimburse him for the surplus. Whether or not a settlement will be reached allowing Fair to remain in his home remains unclear.

Though the U.S. Supreme Court's ruling last year was supposed to make this the straightforward law of the land, some states—including Arizona, Alabama, New York, and New Jersey—have tried to find ways to work around it, creating labyrinthine requirements that put the burden on the homeowner to fight for their equity back post-seizure.

Chelsea Koetter, for example, lost her Michigan home over a $3,863.40 tax debt. She erred during the state's convoluted process to claim her equity, so the state denied her request and seized the full value of the home. The profit was $102,636.