In the ensuing years, DiPietro found himself in a protracted legal dispute over how he could use his property. He had mowed some fields and had built some wooden fencing and small sheds, but he was later told these actions violated certain state and local environmental regulations.
As a result of various enforcement actions and lawsuits, DiPietro struggled to use his property in a profitable manner, and his financial situation became dire. He became delinquent on his property taxes in 2016, and 14 percent annual interest began accruing on his unpaid taxes.
As the years went by, the legal battle intensified and DiPietro’s situation only worsened. By 2021, he owed the town roughly $60,000 in unpaid taxes and other costs. The property value at the time was roughly $370,000, and DiPietro owned it outright.
A couple of simple solutions to his debt problem likely jump to mind. Couldn’t he just make money with the property some other way or sell part of it to pay his debt? Indeed, he could—if the town would let him. But the town stopped him at every turn. When he applied for a forestry permit to sell trees on his land, for example, the town’s conservation officials asked for it to be denied on account of his alleged environmental violations, and the department in charge of permits complied with this request.
He was also prohibited by the town from getting a guard dog and from connecting to the internet and electrical grid, and the town would not legally recognize his address. These and other restrictions undermined several potential projects. The town also refused to give him the permits he needed to sell part of his land, and the reason for the refusal was the fact that he had outstanding property tax debt.
In short, DiPietro was caught in a catch-22. He had to pay the debt to get permission to make money, but he needed money first to pay the debt.
With the debt remaining unpaid, a land court foreclosed on the property in December 2021, transferring absolute title of the land to the town as payment for the debt. The town has since initiated eviction proceedings to remove DiPietro from the property.
And what about the $310,000 in equity above and beyond the debt, the equity that rightfully belongs to DiPietro? Oh yeah. The town kept that…which it’s allowed to do under state law.
Noting the injustice, the Pacific Legal Foundation (PLF) joined DiPietro in filing a lawsuit against the town on January 10, 2023, demanding he get back that portion of the equity which is rightfully his.
A Pervasive Problem
The practice of keeping the equity of a foreclosed property above and beyond the debt owed is known as home equity theft, and it’s a lot more common than you might think. Across the country, local governments and private tax-lien investors regularly foreclose on properties for unpaid tax debts and then keep the whole value of the property—even though that value is often far greater than the amount of debt that was owed.
