Michigan local governments have stumbled upon a lucrative cash cow to line county coffers, courtesy of a poorly monitored state tax law that allows foreclosures and seizures for as little as $8 in unpaid property taxes. To add insult to injury, local government treasuries claim the entirety of the sales proceeds from the foreclosures well exceed the total tax bill owed.
All that may come to a halt once the state’s Supreme Court hears a case this fall brought before it by the Pacific Legal Foundation (PLF), for a group of private property rights advocates who are rallying behind several egregious government takings under cover of recouping outstanding property tax debts. PLF is litigating on behalf of Uri Rafaeli, a Southfield resident who lost his home to foreclosure for underpaying his property tax by $8.41, and Andre Ohanessian, who had his 2.7 acre property foreclosed upon by Oakland County for a $6,000 tax debt.
“I think we have a good shot at winning,” Christina Martin, a PLF attorney representing the two Oakland County residents, said in a phone interview with The Center Square. “In fact, I’m pretty optimistic the Michigan Supreme Court will recognize the perverse incentives for local governments to seize private property using the state’s General Property Tax Act (GPTA) as pretense.”
Martin explained that the promise of a significant payoff from foreclosing and selling homes and keeping the total proceeds above and far beyond the initial tax debt tempts some local government officials to ignore standard GPTA rules requiring them to provide notice to homeowners well before initiating foreclosure or even to satisfy due process requirements.
“If you were sued in small claims court, you’d receive more notice than property owners facing foreclosure by Oakland County,” Martin told The Center Square. “It’s an overly excessive punishment for a ridiculously small debt,” she continued, adding: “You can go back to 1215’s Magna Carta to find legal support for limiting government’s ability to seize private property. Even the King couldn’t take your land.”
To support her case, Martin cites the details of Sergei Antipov, who purchased land and proceeded to build a new home for $3.5 million on Diamond Lake in Cass County. In April 2014, Cass County seized the property over more than $14,700 in unpaid property taxes without ever notifying Antipov he was in tax arrears. “Cass County never compensated Antipov for taking the new home he paid to build – but never lived in,” according to a brief filed April 2019 in Oakland County Circuit Court.
Despite documentation of extreme negligence by county employees and title contractors to notify Antipov, county employees moved forward with forfeiture proceedings. By the time Antipov had been notified, the redemption period had expired. Emails between county employees expressed that Linda Irwin, at the time the Cass County treasurer, was “tickled pink” about the financial windfall posed by selling Antipov’s property.
Although Antipov’s case was in Cass County, according to the brief, “the taking of valuable property by county treasurers, for relatively minor tax delinquencies, and without reimbursement of the surplus over what was owed, is a grave concern throughout Michigan, not just Oakland County.”
Wesley Hottot, a senior attorney for the Institute for Justice (IJ), a nonprofit libertarian law firm focusing on property rights and civil liberties, filed an amicus brief on behalf of Rafaeli and Ohanessian. In an email to The Center Square, Hottot said, “Earlier this year, in Timbs v. Indiana, the U.S. Supreme Court held that the Excessive Fines Clause applies in state and local forfeiture proceedings. The lower courts in this case held that the taking of Mr. Rafaeli's home was a forfeiture, but refused to let him argue that forfeiture of his home was excessive.
“The Michigan Supreme Court now has the opportunity--and the obligation--to reverse,” he said.