Class-Action Lawsuit Targets Wayne County Foreclosure Practices

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by Scott McClallen

 

A Detroiter filed a class-action lawsuit against Wayne County on Thursday, claiming officials foreclosed on her home, sold it at less than half the market value, and then pocketed the proceeds.

Philip L. Ellison, an attorney at Hemlock-based Outside Legal Counsel, and others filed the lawsuit Thursday in the U.S. Eastern District Court on behalf of Tonya Bowles, who lost her East State property to foreclosure in 2017.

Bowles owned a property with a fair market value of $36,600 that Wayne County Treasurer Sabree foreclosed in 2017, and according to the lawsuit, sold for $14,000 and pocketed the rest.

The lawsuit doesn’t say how much Bowles owed in taxes. It targets Sabree’s office for “gross governmental abuse.”

Michigan law allows counties to foreclose properties to fulfill outstanding property taxes, but in Metro Detroit, city officials have been known to foreclose and seize houses for small amounts of unpaid taxes, and selling them for far more than the taxes owed.

For example, Oakland County seized Uri Rafaeli’s home in 2014 over $8.41 of initial overdue property taxes and sold the property for $24,500 – more than $35,000 less than Rafaeli paid for it – and then pocketed $24,214.

“Defendants have taken Plaintiffs’ and the class members’ property interests in the form of Equity – that is, the value of their properties to the extent they exceed the properties’ Tax Delinquencies – and have appropriated this property for public use without the payment of just compensation in violation of the Fifth and Fourteenth Amendments to the United States Constitution,” the suit says.

The lawsuit claims Wayne County officials “abuse” the foreclosure process.

“They do not foreclose on the parcel, sell it, keep the amount of outstanding taxes plus reasonable fees, and return the rest to the property owner,” the lawsuit says. “Rather, they foreclose, sell the property at a reduced amount, and keep all of the proceeds and excess/surplus equity for itself. As a result, property owners lose the entire value of their property, which is often orders of magnitude more than the outstanding tax bills.”

The lawsuit seeks to have the Wayne County officials’ conduct declared “unconstitutional under the federal and state constitutions, even if being undertaken consistent with the General Property Tax Act.”

Sabree’s office didn’t respond to a request for comment.

The Michigan Supreme Court in July ruled that counties withholding any surplus from tax-foreclosure sales that exceeded the amount owed constituted an “unconstitutional taking without just compensation.”

“These fundamental principles – that the government shall not collect more taxes than are owed, nor shall it take more property than is necessary to serve the public – protect taxpayers and property owners alike from government overreach and have remained a staple in Michigan’s jurisprudence,” Supreme Court Justice Brian Zahra wrote.

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Scott McClallen is a staff writer covering Michigan and Minnesota for The Center Square. A graduate of Hillsdale College, his work has appeared on Forbes.com and FEE.org. Previously, he worked as a financial analyst at Pepsi.
Photo “Detroit Home” by Jason Paris. CC BY 2.0.

 

 

 

 

 

 

 

 

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