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Lawsuit: Michigan tax foreclosure laws unconstitutional

Dec 8, 2017

Credit Steve Carmody / Michigan Radio

new lawsuit says Michigan’s property tax foreclosure laws are unconstitutional and amount to “government sanctioned theft.”

The case was filed this week on behalf of two men who lost Oakland County properties to foreclosure.

One of the men, 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.

The lawsuit says Michigan counties who do this violate the takings clause of the Fifth Amendment, because the government can’t take more than what’s owed from citizens.

Christina Martin is an attorney with the Pacific Legal Foundation, which filed the lawsuit. She says that clause in the constitution is clear: private property “should not be taken for public use unless just compensation is paid.”

“So when the government takes your property for the public purpose of collecting a delinquent tax debt, they should only be able to collect what is owed,” including interest and fees, Martin said.

But when Michigan counties like Oakland then pocket the total proceeds from the sale of the property, that violates the constitution, the lawsuit maintains.

“Everybody has a property right in the equity of their property,” Martin said. “The government cannot use the tax foreclosure process as an excuse to swallow up everything else.”

Martin says a handful of other states have similar laws allowing county governments to do this, though “Michigan has an unusually short [3-year] timeline” for property owners to catch up on delinquent taxes. However, “the vast majority of states give the surplus proceeds from tax sales to the former owners.”

The lawsuit asks the Michigan Supreme Court for immediate “leave to appeal” lower court decisions in the two cases. The Michigan Court of Appeals ruled against the plaintiffs, finding that seizing the whole value of the homes, in excess of what the homeowners owed, is legal as a form of civil asset forfeiture.

Oakland County will get a chance to respond to the lawsuit before the Supreme Court decides whether to take up the case.