by Scott McClallen
The Michigan tax code is finally aligned with a 2020 Michigan Supreme Court ruling that prohibited county treasurers from pocketing excess equity when foreclosing on tax-delinquent homes.
The ruling followed Oakland County seizing Uri Rafaeli’s property in 2014 over an initial tax debt of $8.41, which rose to $285.81 after interest, penalties, and fees.
Oakland County sold the property for $24,500 – more than $35,000 less than Rafaeli paid for it – and then pocketed $24,214.
Rafaeli was left empty-handed.
But now, there’s a new avenue through which those with a financial interest in foreclosed properties can claim and possibly get a payout.
Here’s how it works:
– County treasurers notify property owners of foreclosure. The delinquent tax process is a roughly two-year cycle.
– The property owner has until July 1 of the foreclosure year to submit a form to the county treasurer that’s filed with the circuit court in charge of hearing the foreclosure case.
– After the foreclosure sale and any additional debt is paid, including taxes, interest, penalties, and fees, the county treasurer notifies the judge of what remaining proceeds are available. The judge determines how much each person gets and orders the treasurer to disburse the funds.
The legislation allows an additional 5% fee for treasurers from sale proceeds to rehabilitate and sell properties.
“Taxpayers who’ve suffered through foreclosure now have new rights,” Michigan Association of County Treasurers (MACT) President and Livingston County Treasurer Jennifer Nash said. “We are working to make sure people know what those rights are. We believe this is a fair and equitable solution to the Michigan Supreme Court’s July ruling that said county treasurers couldn’t keep proceeds of tax sales.”
MACT claims it prevented 97.5% of property tax foreclosures in 2019.
Poverty exemptions will be extended from one year to three years, retroactive to 2019, if the city resolves to allow longer poverty exemptions for eligible homeowners.
To get an exemption, a person must be on a fixed income solely from public assistance, not subject to annual increases beyond the inflation rate.
If the applicant ceases to own or occupy the principal residence or gets a boost in pay or assets, making them ineligible, they have 45 days to notify the county treasurer’s office or risk repayment of taxes plus interest.
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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.