It’s absurd that we needed a lawsuit that went to a state supreme court to make this right.
Uri Rafaeli bought a rent house in Southfield, Michigan in 2011 for $60,000. He underpaid his property taxes that year, which he claims was a mistake, but then paid his taxes in full in 2012 and 2013. He also paid his back taxes due in January of 2013, or so he thought. He miscalculated by $8.41. That’s not $80, or $800, or even $8,000, but a measly $8.41.
Oakland County foreclosed to collect the back taxes, sold the house for $24,500, and kept the entire amount.
It’s inconceivable that this could be considered anything but theft of private property, but the county claimed they were just following the law. The sad part is, they were right. A piece of legislation passed in 1999 allows counties to foreclose on and sell properties to collect back taxes, and to keep any excess funds. Needless to say, Rafaeli wasn’t alone in his misfortune.
Andre Ohanessian owed $6,000 in taxes, penalties, and fees. His property was sold for $82,000 and the county kept everything.
The Michigan Supreme Court found that the actions by the counties ran counter to the Michigan State Constitution, under which the government cannot collect more tax than is due. With this in mind the 1999 law is unconstitutional.
This court decision “really is going to upend the whole system of tax delinquency, and the role that counties play.”
“They’re putting the counties in the position right now where they can only lose money and they can’t make money, and that’s not sustainable. So it’s really going to force the Legislature to get busy, and figure out a new way of doing this. Blow up the system, and start over to live within the court decision.”
Well, maybe if they weren’t stealing money from their citizens in the first place they wouldn’t have to scramble to fix the situation.
The sad part is that Michigan isn’t alone. Several other states allow government entities to seize property for delinquent taxes, sell the assets, and keep all the cash.