New Statutes Can Help Individuals Challenge their Local Governments
In mid-2020 Michigan Supreme Court issued a landmark decision in Rafaeli, LLC v Oakland County that sent shockwaves across the state.
Mr. Rafaeli went to the courts for justice after he inadvertently underpaid his property taxes by $8.41. Oakland County deemed him delinquent on his payments and 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 an $8.41 debt.
In the landmark opinion penned by Michigan Supreme Court judge David F. Viviano, the 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 was unconstitutional. As a result, Oakland County must now repay the surplus they received from the sale.
This case opened our eyes to a continuing statewide practice that has affected thousands. Due to the Rafaeli decision, county governments must now repay the profits generated from property tax foreclosures and can no longer hold on to excess funds after a debt has been satisfied.
Following the Rafaeli judgment, the legislature has drafted, voted, and added senate bills 676 and 1136 to the Michigan Code. The bills were codified into MCL 211.78. Here are the parts of the law you should be familiar with:
- MCL 211.78(g), (i), (l), and (t), which is of most importance to those harmed by the government’s illegal taking prior to July 17, 2020.
- MCL 211.78(l) provides a statute of limitations on these claims. Any person who seeks to recover the surplus profits held by the government must file a claim within two (2) years of a judgment of foreclosure.
- MCL 211.78(t) created a framework for how these claims can be brought against local governments. The legislature is requiring claimants to file their notice of a claim using a government-issued form. This form is not yet available but is ordered to be made available to the public on the Michigan Department of Treasury website and local governments that have an official website.
Other parties who have lost assets this way in the past are waiting to see whether the Michigan Supreme Court will deem the Rafaeli decision retroactive. Such a ruling would allow people who were harmed prior to this decision to seek recovery for the surplus funds.
If you had a piece of property foreclosed upon due to a tax delinquency and you believe you are entitled to the equity you built in your home, call Grewal Law PLLC at (888) 211-5798 for a free consultation.