FILE - Pacific Legal Foundation lawsuit Wayne County, Michigan

Erica Perez is suing Wayne County in Michigan after the county seized her property and resold it over a $144 property tax debt, according to a lawsuit filed by the Pacific Legal Foundation.

A mistaken $144.59 underpayment of property taxes wound up putting the property of a Wayne County resident and her family in foreclosure. The county subsequently sold the family’s small apartment building and detached house at auction for $108,000, and pocketed all the proceeds. 

“Our founders believed that government exists to protect property – not to seize it for profit at the first opportunity,” said Patrick Wright, vice president for legal affairs at the Mackinac Center for Public Policy, a Michigan-based free market educational and research organization.

The local government taking property from Erica Perez and her family for the purpose of selling it at an astronomical profit has prompted a lawsuit by Perez with assistance from the Pacific Legal Foundation.

“We filed the Perez case in state court, because we also wanted to challenge the government's ability to take the four-unit apartment and the separate house, when seizing any one of those units would have easily satisfied the underlying debt,” said Christina Martin, a PLF staff attorney, in an email to The Center Square.

“Michigan's tax law creates a perverse incentive for counties to foreclose on valuable properties for small tax debts, because the tax law says that counties can sell that property and keep all the extra profits—no matter how small the underlying tax debt,” Martin continued. “In other words, in many cases, it is more profitable for a county to foreclose on property than it is to help people avoid foreclosure.”

Martin compares the Michigan law that allowed the taking of the Perez property to a former Montana law that has been recently changed.

“Montana just changed its tax law (with overwhelming bi-partisan support and with extensive educational efforts by PLF) to protect most properties that contain at least one home,” she wrote.

“But before that change, people could lose their homes and all of their equity for similarly small tax debts. For example, the Great Falls Tribune wrote about how during the last recession, Gary Guidotti, a 78-year old electrician in Cascade County fell behind on his property taxes. Under Montana’s tax law, the county took his home because of the $1,125 tax debt and sold it to investors for pennies on the dollar. Guidotti lost everything while investors reaped a windfall—taking absolute title to Guidotti’s $140,000 home.”

Citing an amicus brief filed by PLF to the Michigan Supreme Court, Martin said equity surplus revenues generated by eight Michigan counties by auctioning homes exceeded $36 million in only six years.

Perez and family members purchased the parcel and buildings near Detroit’s Mexicantown for $60,000 in 2012 with the intent of renovating and living in the house while refurbishing the four-unit apartment building as an investment opportunity. Three years of hard work and thousands of dollars of personal funds later, Perez was set to enjoy the fruits of her labors and entrepreneurial spirit.

That was before she underpaid her 2014 taxes, however. The Wayne County Treasurer’s Office under the aegis of Democrat Eric Sabree never notified her of the discrepancy, which eventually ballooned from just under $145 to $504.45 due to interest and penalties.

By the time the Perez family was notified, it was too late. Their property had been sold at a foreclosure auction, netting the county a hefty profit more than 200 times the total amount owned by the Perez family.

Metropolitan Detroit news sources have reported previously this year multiple improprieties involving Sabree, his wife Badriyya and several members of his family concerning Wayne County home foreclosure auctions.

For example, the Detroit Metro Times disclosed a company controlled by Badriyya and listing Sabree as an agent acquired many Motor City properties through the auction process, raising serious ethical concerns due to the fact the transactions violate county policy. In his defense, Sabree said the auction purchases were made before the current rules and when an independent contractor conducted the auctions.

Further, once purchased by the Sabree enterprise, including the couples’ sons and other relatives, the properties accrued significant property tax arrearages. Using the same rules applied to the property confiscated from Perez, the parcels owned by the Sabree organization should have been auctioned off but were not. Ten days after the Detroit News inquired about $29,000 in unpaid taxes on properties owned by the Sabree company, the back taxes were paid off.

A Wayne County Ethics Board hearing dismissed conflict-of-interest charges against Sabree this past July by a 5-1 vote, claiming the evidence against him amounted to nothing more than news reports. Discussing the fact Sabree’s family members purchased homes auctioned under foreclosure by his office, Board Chair Carron Pinkens, the lone vote against dismissing the charges, told the Detroit Free Press: “I personally find it strangely incredible.”

Regional Editor

Bruce Walker is a regional editor at The Center Square. He previously worked as editor at the Mackinac Center for Public Policy’s MichiganScience magazine and The Heartland Institute’s InfoTech & Telecom News.