Michigan Supreme Court Rules on Property Tax Foreclosure Process

property tax

Today, the Michigan Supreme Court issued a landmark decision in Rafaeli, LLC v Oakland County that sent shockwaves across the State of Michigan. The Michigan Supreme Court struck down the practice of counties to pocket the profits generated from property tax foreclosure auctions as unconstitutional. As a result, county governments must now repay the surplus profits generated from property tax foreclosures and cannot keep funds over and above what was actually owed.

Michigan’s property tax foreclosure process is similar in many ways to the typical foreclosure process, but with one big—and unconstitutional—difference. When your property taxes become delinquent, the government doesn’t just foreclose on your property to pay the past due taxes—it actually pockets the entire proceeds from the sale, including any amount over and above what is owed to satisfy the debt owed to the county.

In Rafaeli, LLC v Oakland County, Mr. Rafaeli inadvertently underpaid his property taxes by $8.41. Because he was delinquent on his property taxes, Oakland County forfeited and foreclosed on his property. The property sold at auction for $24,500. Following Michigan law, Oakland County kept the full $24,500—even though the original debt was only $8.41. In other words, Oakland County was able to generate a substantial windfall of over $20,000 to satisfy a $8.41 debt. In today’s landmark opinion, the Michigan Supreme Court held that Oakland County’s decision to keep the funds generated from the sale of Mr. Rafaeli’s property over and above the $8.41 debt constituted an unconstitutional taking. As a result, Oakland County must now repay the surplus funds that they received from the sale.

The practice of Michigan county governments to forfeit and foreclose on properties for unpaid property taxes is common. It happens in every county across the State. County governments generated massive windfalls through this practice. By some estimates, county governments may have generated a net profit of over $2B through this unconstitutional practice.

If you’ve lost your home or property due to delinquent property taxes, you may be able to file a claim for your lost equity in your property. Our attorneys at Grewal Law PLLC have a proven track record of fighting for what’s right – and we are committed to helping you navigate the law in the wake of this Michigan Supreme Court decision.

Contact our office today for a free, confidential consultation to discuss your options.

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