A proposal approved by the state House on Wednesday would remove the power given to towns and cities allowing them to settle a tax debt by selling a delinquent taxpayers’ house and keeping any excess equity for themselves or their agents.

The practice has been dubbed “equity theft” by critics.

More than a year after the U.S. Supreme Court ruled in Tyler v. Hennepin County that a Minnesota municipality violated the Constitution’s takings clause when it sold a foreclosed property and kept proceeds beyond what the property owner owed in taxes, lawmakers took a step towards outlawing the practice in Massachusetts on Wednesday by unanimously approving An Act relative to municipal tax lien procedures and protections for property owners in the Commonwealth.

“Simply put, this bill is about protecting property owners and making towns whole,” Braintree Rep. Mark Cusack, Chair of the Joint Committee on Revenue, told his colleagues from the House floor.

Last summer, following the Tyler decision, First Assistant Attorney General Pat Moore told the Joint Committee that the state’s Chapter 60 law must be entirely reworked.

“The time is now to fix the statute,” Moore told the committee. “The tax lien foreclosure process set forth in Chapter 60 of the General Laws is unconstitutional.”

The bill, according to Cusack, would bring Chapter 60 into compliance by requiring municipalities or third parties acting on their behalf to “provide detailed accounting to the former owner following the foreclosure or sale of a property, detailing the amount of excess equity that is available after satisfying the outstanding tax debt, interest, fees and other costs of the sale.”

The bill would mandate that any excess equity resulting from the sale of the property be sent to the taxpayer within 60 days of closing, not kept by a third party seller or a municipality, as is currently the practice.

Homeowners who lost their property to foreclosure after the high court declared the practice unconstitutional in late May of 2023 would be eligible to seek relief under the law, according to Cusack.

Forms notifying property owners of foreclosure will be updated to include information about their rights and how to settle their tax debt before their home is taken. The bill would increase the allowable tax-repayment plan terms from five years to 10, and decrease the current 25% repayment plan down payment requirement to 10%.

Former homeowners who dispute the terms under which their property was sold will have the right to appeal to the Superior Court for judgment and seek a jury trial, Cusack said.

House Speaker Ron Mariano said that he’d heard from multiple lawmakers about the home equity problem and that, while the bill will certainly help the state comply with the Tyler decision, it also will helps residents hold on to their hard earned equity.

“This legislation is not only an effort to ensure that the Commonwealth’s laws comply with court rulings, it is also about protecting the rights of property owners here in Massachusetts throughout the tax lien foreclosure process,” he said in a statement.

A similar proposal was offered by the state Senate as a rider attached to their annual budget.