Michigan Tax Foreclosure Class Action Lawsuit: What You Should Know

[XLFD]

Every year, county treasurers throughout Michigan seize and sell thousands of properties gleaned from property owners who owe a small amount of past due tax.  Some of these parcels are resold at tens, hundreds, or even thousands times the overdue taxes.  Uri Rafaeli, lost a rental property in Southfield when he miscalculated the amount of interest he owed on 2011 property taxes by $8.41. Oakland County foreclosed, then sold the home for $24,500.

Instead of returning any excess sale proceeds or the "surplus equity" in excess of the tax debt, treasurers simply keep the extra funds as profit for the county's general budget.  Current Michigan law allows county treasurers to keep any difference between the amount of delinquent property taxes, and whatever the property sells for at auction. So, if a home with $2,000 in back property taxes sells for $100,000, the county pockets a $98,000 surplus.  Here's how the process works.

While the above case with Rafaeli remains pending in front of the Supreme Court of Michigan against Oakland County, Outside Legal Counsel PLC of Hemlock, led by anti-corruption attorney Philip Ellison, is leading the charge against this practice in a slew of other class-action challenges that encompass up to 80 Michigan counties outside the 3 county Detroit metro area, including all local counties.  Ten regions covering Michigan will see the proceedings go to the courthouse of their starred county, as seen below, ours would be in Newaygo. 

The class-action lawsuit seeks to stop this process and allow the foreclosed a fair transaction, just like what would happen with a bank foreclosure.  “If they’re able to make more than what the tax debt is, they need to make a process available for the property owner to get that money back,” said Ellison. “It’s identical to what happens when you don’t pay a mortgage. If the bank forecloses because you don’t pay a mortgage and they sell your house for more than what the note is, the mortgage company has to refund the difference.”

The local plaintiff and class representative is Ronald Maynard of Newaygo County.  According to the lawsuit, Maynard owed $7,000 in taxes, plus penalties and other costs. In 2016, Newaygo County Treasurer Holly Moon foreclosed on the property, selling it to a land speculator at a tax auction for $70,000.  Per protocol for tax foreclosures, Newaygo County did not return the $63,000 difference between the tax auction price and the total tax delinquency. Maynard is seeking damages, as well as an order declaring the foreclosure process unconstitutional.

Assuredly, county treasurers and other officials will be fighting stridently against this lawsuit in each of the 10 regions, as this can often provide a significant source of income for them, rationalizing that it takes a lot of their resources to go through such foreclosures over tax debt.

Have you been foreclosed on in Michigan, seen your property sell for a lot more than you owed on taxes and think you may have a chance to join this class action.  Maybe this happened to your parents following their death, or somebody you know.  Read this layman's short article on what joining the lawsuit would entail and then consider joining if you think you have a claim by going here.  

[Willy]

There was a time when tax foreclosures on real estate took up to 7 years which gave most people time to redeem their property. That system worked well for many years. That all changed when Detroit went into distress mode and people began to abandoned houses they could neither sell or even give away. Tax repo laws were dramatically changed so that Detroit could, in a short period of time, claim these properties so that they could be resold or as things turned out demolished en-mass. Unfortunately these are State laws and they had to be applied to all real estate within Michigan. So this was yet another example of Detroit, which was destroyed by leftists, causing grief for the rest of the State.

[shinblind]

The issue began because  their were people who rented houses with no intention of ever paying the non- homestead property tax that was due. It was so messed up that you could buy a house that was  currently occupied by renters at tax auction, not put another penny into it and turn it into a positive cash flow operation by continuing to rent to the people living there, until such time as the property was again sold at tax auctions. It happened locally as well as Detroit.

Still any amount above the tax due should have been refunded to the original owner.

Another factor was owners who had these for second homes and lost their personal possessions by not being properly informed that they could reclaim these possessions. Under the law you are only buying the real property, anything else on the property was to be moved to storage and an effort be made to contact the previous owner and let them claim the goods less storage fees and moving expense.  

More often than not the personal property was divided into three lots, valuable stuff the new owner keeps, yard sale stuff, and dumpster stuff. Everything from family history, antiques, vehicles were and are still being  lost. 

[Willy]

That may have been a symptom of the process where people took advantage of the situation but the lengthy wait for Government agencies getting delinquent monies and foreclosures was the main reason for the changes in Michigan's property tax laws. Below is a link to documents put out in 1999 by the Mason County Treasurer to let people know what the changes were and how they affect them. The old law stated that the ["at least 4 years to pay"] was actually extended to 7 years when appeals and redemption time to repay any liens on the property were applied.

http://www.masoncounty.net/userfiles/filemanager/235/