NewsLocal NewsMichigan

Actions

Michigan Supreme Court rules local governments can't profit from tax foreclosures

Posted at 10:25 PM, Jul 22, 2020
and last updated 2020-07-22 22:43:10-04

LANSING, MI. — A Michigan Supreme Court decision could end a years-long legal battle for a man who lost his home over an $8 debt.

In 2014, retired engineer Uri Rafaeli lost his rental property over an $8.41 property tax debt.

Rafaeli's Southfield property was seized by Oakland County, put up for auction and sold for more than $24,000.

The county kept the profit.

“When government takes an entire house as payment for a tiny debt, that is theft, and it is unconstitutional,” said Christina Martin, senior attorney at the Pacific Legal Foundation.

However it’s not entirely rare, at least in Michigan.

In 2014, FOX 17 covered a similar case out of Kalamazoo County where a woman who owed $2,000 in back taxes lost her $150,000 home to the county.

There's about a dozen other states that are doing something similar,” Martin added. "Michigan might be the worst in the sense that here's an interesting combination of factors: one, it's highly profitable for counties to foreclose and take all this extra money."

Martin is the lead attorney for Rafaeli’s class-action case against Oakland County, which made its way to the Michigan Supreme Court last fall.

“We took this case just to protect the property rights of people across Michigan, and ultimately we want to end this kind of predatory tax collection process across the United States,” Martin explained.

Last week, the Supreme court issued its opinion, ruling that a county cannot collect more money than it was owed after a foreclosure sale. In Rafaeli’s case, that means he would be entitled to all the money the county sold the home for, except $8.42.

“The court said, quote, ‘the government shall not collect more taxes than are owed, nor shall it take more property that is necessary to serve the public.’ And I think that really highlights the injustice that happened here,” Martin said. “Here the government collected far more than it was owed and, really, it never should have taken that entire house in the first place. There were better ways to collect $8."

Michigan's Supreme Court’s ruling will set a precedent for a number of pending cases.

Rafaeli’s case will now head back to trial court.