South Dakota bans home equity theft

Couple looking at built structure from outside.(Photo: iStock - skynesher)

Gov. Kristi Noem signed into law House Bill 1090, which ends home equity theft in South Dakota by requiring tax-foreclosed properties to be auctioned within one year of the foreclosure, and the proceeds returned to the original owner.

The bill, sponsored by state Rep. Kirk Chaffee and Sen. Jim Stalzer, is the first of its kind to be introduced and passed since the Supreme Court unanimously ruled in Tyler v. Hennepin County that home equity theft is unconstitutional.

“Home equity theft is not only unconstitutional, it is patently unjust,” said Jim Manley, state legal policy deputy director at Pacific Legal Foundation. “We are thrilled that South Dakota has taken the necessary steps to protect homeowners’ property rights. Other states should follow South Dakota’s lead and amend their laws to comply with the Supreme Court’s decision in Tyler. States that refuse to do so could potentially face huge liability in future litigation.”

As Chief Justice John Roberts wrote in his unanimous Tyler opinion: “The taxpayer must render unto Caesar what is Caesar’s, but no more.”

Yet today, 18 states, plus the District of Columbia, continue to have home equity theft laws on their books.