Wayne County sues to collect back taxes on properties it once sold at tax-foreclosure auctions

Jun 19, 2014

Credit Sarah Cwiek / Michigan Radio

Wayne County treasurer Raymond Wojtowicz’s office has filed a lawsuit to collect about $80 million in delinquent property taxes.

The irony is that these are taxes owed on properties the county once owned, but sold at auction after they were foreclosed on...for delinquent property taxes.

Wayne County has sold more than 28,000 residential and commercial properties at its annual tax-foreclosure auctions since 2011.

But now, about 78% of them have fallen back into tax-delinquent status. Most of them are residential, and the vast majority located in the city of Detroit.

Wayne County chief deputy treasurer David Szymanski said the office started including “reverter clauses” in purchase agreements during the 2011 auction, when it became clear that many bidders snapping up cheap foreclosures were neglecting to pay taxes on them.

That clause gives the county legal rights to take the property back if the owner doesn’t stay current on their taxes.

Szymanski said the county had hoped local communities would enforce the clauses, but has now decided to sue because local governments either can’t or won’t do that.

“If people don’t pay their taxes, they shouldn’t own property,” Szymanski said. “If we had that $80 million, that would certainly fund a lot of government services.”

Szymanski said defendants will get 30-day notices before they’re brought to court. During that period, property owners can pay the county in full and be dropped from the lawsuit.

Defendants are entitled to a court hearing, where they can challenge the tax bill if they believe it’s wrong, or on some other legal grounds.

Those who are unsuccessful, or opt not to challenge their bill, can choose between a 4 or 10-month payment plan.

But if owners don’t comply, or fail to complete their payment plan, the property reverts back to Wayne County.

“We’re sort of bending over backwards here to come up with plans to understand the fiscal restraints people are under,” Szymanski said. “But we need to collect taxes.”

Wayne County’s massive foreclosure auctions have drawn national and even international attention in recent years, as bidding moved online around the same time the market was flooded with foreclosed homes.

Critics have suggested the county should have done more to help keep struggling homeowners in their homes, and made the whole process simpler and more transparent.

Others have criticized how the auction is run, saying it encourages irresponsible speculators and other bad actors. Some suggest the county should pre-screen bidders to filter out people with a history of neglecting properties and not paying their taxes.

A Detroit News investigation found that in 2011, owners bought back more than 400 properties that had gone into foreclosure for just a fraction of what they owed in taxes.

But Szymanski argued that a screening process would unfairly punish owner-occupants who have simply struggled to pay their taxes—while bad actors with enough savvy and resources could keep on bidding through different agents or front companies.

“We don’t want to take anyone’s property,” said Szymanski. But “we need these taxes to fund essential government services.”