Times are tough all over but geez Louise isn’t it a bit outrageous when a county tax assessor seizes and sells a man’s house right out from under him over the paltry sum of $8.41 in underpaid property taxes. That’s right: these taxes weren’t unpaid – they were underpaid. Why couldn’t the local administration work with this guy?
The man in question is Uri Rafaeli, 83, who was a property owner in Oakland County, Michigan until the retired engineer was booted out and lost all his home equity after the county invoked a 1999 state property tax law that let them control the deed to pay an overdue 2011 property tax bill. The residence sold for $24,500 which the county kept in its entirety to satisfy the $8.41 debt.
Philip Ellison, private attorney, said of the legal practice that has caused thousands of Michigan residents to lose their land over a county tax dispute:
“It is simply government-sanctioned theft.”
The Delinquent Property Tax Foreclosure Public Act 123 “amended the General Property Tax Act to subject tax-delinquent property to forfeiture, foreclosure, and sale over a three-year period.”
The law was passed to speed up the reclamation and rehabilitation of abandoned properties and grants country treasurers the authority to act as debt collectors. Therein lies the problem: the bill created a clear (if unintended) profit motive to take advantage of a legal technicality to enrich the county coffers – at taxpayer expense. Not all the forfeited properties are rundown or empty, either, but the county tax collector doesn’t care.
In August 2011, Rafaeli bought a three-bedroom, 1,500-square-foot home in Southfield, Michigan, a lower-middle-class suburb just north of Detroit. The Oakland County Register of Deeds recorded the $60,000 purchase on January 6, 2012.
In June 2012, Rafaeli received notification that he still owed another $496 on his 2011 property tax bill. The responsible taxpayer made subsequent payments on time and in full. Court documents show that, in January 2013, he tried to settle the unpaid tax debt with a final payment.
However, Rafaeli failed to compute the interest owed correctly which added $8.40 to the amount he had calculated and paid. Evidently, the county didn’t advise the diligent property owner about his math error. Instead, the t-ax man waited until March 31 of the third year of the delinquency (2 years and 31 days after the county collection process began) to foreclose and auction the property, as allowed by law.
Michigan property taxes are due twice a year with payments due in April and November. Any unpaid debts from the prior year’s delinquent properties are reimbursed by the county in March of the following year. The money comes out of the county’s “delinquent tax revolving fund” (DTRF).
Michigan law allows counties to charge a one-time 4-percent administrative fee per each delinquent property and an additional 1 percent interest for every month the tax goes unpaid.
After a seized property is auctioned, the revenue is deposited into the same DTRF which purchased the municipal debts. Any surplus funds can be transferred into the county budget.
Wayne County has redirected more than $382 million in delinquent tax surpluses into its general fund budget since 2012. In 2017, the $48 million collected in fees and interest from people trying to save their homes amounted to 9 percent of the county’s $535 million in revenue.
Robert Ficano, Wayne County’s executive director for 12 years until 2014, also opposed the draconian tax law which robs the taxpayers to pay the government:
“Foreclosing on people’s homes shouldn’t be a policy to sustain yourself. From a policy perspective, you hope it dries up. You don’t want to have to keep foreclosing in order to balance the budget.”
Industry professionals agree that such laws constitute “home equity theft” and are unconstitutional, unfair, and excessively punitive.
A nonprofit law firm called Pacific Legal Foundation (PLF) is representing Rafaeli as part of a class-action lawsuit. PLF attorney Christina Martin said:
“Michigan is currently stealing from people across the state. Counties have been authorized to take not just what they are owed, but to take people’s life savings.”
Tony Saunders, chief financial officer for Wayne County, also sided with the property owners:
“We would much rather have people stay in their homes paying their property taxes.”
Rafaeli’s legal team alleges that over 100,000 properties (and their equities) have been seized by Michigan since 2002.
Michigan legislators have no incentive to bar the practice of seizing homes over minuscule property tax delinquencies. GOP State House Rep. Gary Howell introduced a bill to reform Act 123 and collected a handful of co-sponsors this year but did not receive a single committee vote.