Fighting home equity theft in Michigan’s unlawful claims process

Chelsea Koetter is a single mom who enjoyed raising her two boys in their two-bedroom home in Bear Lake, Manistee County, Michigan. She owned the home free and clear of any mortgages or other liens.  

She fell behind on her 2018 property taxes, but with her family’s help, Chelsea paid nearly all of what she owed, including her 2019 and 2020 taxes. However, she mistakenly underpaid her 2018 property taxes based on incorrect information from a local government employee. 

As a result, neither Chelsea nor her family realized she had an outstanding tax bill or that she would soon lose her home. On August 2, 2021, the county sold her home at auction for $106,500 and kept all the money—$102,636 more than she owed in taxes, penalties, interest, and fees.

Just one year earlier, the Michigan Supreme Court affirmed it is unconstitutional for counties to keep more than they’re owed when collecting property taxes through the foreclosure process. In that case, PLF represented Uri Rafaeli in challenging Oakland County, Michigan, and its treasurer, who pocketed nearly $25,000 over an $8.41 tax debt owed on Uri’s rental property. 

Michigan lawmakers responded in March 2021 by enacting a new procedure to allow former owners to claim—and receive—surplus proceeds from sales of their tax-foreclosed property. However, the process is so complicated and deadlines so tight, that without an attorney’s help, most Michiganders are set up to fail.  

In practice, it goes like this: 

1. The clock starts each year on March 31 when the government takes the title to tax-delinquent properties.
2. The former owners have until July 1—a three-month window that closes before most owners even realize what has happened—to track down, fill out, notarize, and properly file a specific form that serves as formal notice of intent to claim remaining proceeds.
3. The government sells the property between August and November, after which the County treasurer notifies former owners of any excess proceeds.
4. The former owners must then file a motion in circuit court between February 1 and May 15 of the following year to recover any excess proceeds—a year or more after losing their property.
5. Only then is the County obligated to return property owners’ rightful surplus to those who have survived the claims process.

Failing any part of this process allows the government to keep the money, even if all the rest is done correctly.  

In June 2021, not realizing she was too late to save her home, Chelsea and her grandmother went to the County Treasurer’s office in an effort to resolve her tax debt, only to be told she was too late. There was no mention of a form she could fill out to claim sale proceeds.  

Chelsea only found out about the claim form requirement days later from a family friend. On July 9, 2021—just eight days after the deadline but a year before she’d actually be able to collect any proceeds—Chelsea submitted a notarized claim form to preserve her future right to collect just compensation. The County rejected the claim, saying she was too late. 

This is not a fair process. Forcing property owners to chase down their own money through processes that are designed to fail only traps people into accidentally waiving their rights. 

The next month, this time with an attorney’s help, Chelsea again submitted a notarized claim form and was again rejected for missing the first deadline. She then filed a timely motion in circuit court to recover the surplus proceeds. The court rejected that motion as well for missing the original July 1 claim deadline. When Chelsea appealed, the Michigan Court of Appeals ruled against her saying that under state law, this procedure was the only way she could collect her rightful compensation. 

The Michigan and United States Constitutions demand that government pay the owner for extra property it takes, at a minimum, by selling the property and returning any surplus to former owners. No matter what claim processes lawmakers put on the books, once a government takes property, government is duty-bound to pay for it. 

In no other takings context must property owners formally notify government of their wish to be compensated for taken property before the amount of compensation is even known. 

Represented by Pacific Legal Foundation at no charge, Chelsea asked the Supreme Court to affirm property owners’ right to just compensation without complicated claims procedures and unreasonably tight deadlines. Unfortunately, the U.S. Supreme Court denied her petition for certiorari on January 12, 2026.