Legislative update: Supreme Court ruling requires process to allow surplus claims in property foreclosures

The House Committee on Revenue held an informational session on property‑foreclosure law following a recent Supreme Court decision that, according to the committee’s counsel, narrowly requires creation of a process by which surplus sale proceeds can be claimed.

Representative Levy (committee counsel) told members the court required a method "whereby surplus can be claimed." Two principal issues identified for lawmakers and county officials were: (1) who must receive notice and when, and (2) whether counties should be required to use real‑estate agents in sales and, if so, whether that requirement should apply to all properties or only some types. Levy said the Supreme Court purposefully avoided prescribing the details, leaving courts and legislatures to devise appropriate procedures.

Committee members raised concerns about cost and administrative burden. Several members noted county officials had told them notice costs could be substantial. Levy said counties’ property portfolios vary — many tax‑foreclosure parcels are bare land or LLC‑owned lots with few encumbrances — and the cost of broad notice and realtor requirements could be significant. Levy said she is consulting title companies and other stakeholders to estimate those costs and was discussing drafting options that could, for instance, use "may" language to give counties discretion to use real‑estate agents for certain property types while requiring agents for residential occupied properties to better protect vulnerable owners.

Members discussed options used in other states; Levy said about a dozen states had statutes addressing similar issues and that Massachusetts, Michigan and Minnesota have recently updated their laws though the approaches differ. Committee members suggested tiered approaches keyed to property type or value, similar to how vehicle repossession practices distinguish by value, so higher‑value properties receive more extensive marketing efforts.

No bill was adopted at the meeting; Levy said discussions and drafting were ongoing and offered to return with draft language and cost estimates.