Fighting home equity theft in Michigan’s unlawful claims process

Lillian Joseph, a 79-year-old on a fixed income, fell behind on the 2018 property taxes on her house in Iron County, Michigan. In 2021, the County foreclosed over the $2,257 tax debt and sold the house for $27,500. The County kept every penny of the sale, seizing the family’s entire equity in the home. 

A similar situation played out in Alger County. Jacqueline McGee’s death at 53 years old in February 2021 came as a shock. Jacqueline’s family spent the following days focusing on their grief and funeral plans, assuming estate matters could wait. Alger County, however, foreclosed on her home just 10 days after her death. Jacqueline had fallen behind on her property taxes, accumulating $3,600 in taxes, penalties, interest, and fees. Within months, the County auctioned the house for $38,250 and kept all proceeds. 

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. 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 April 1 when tax-delinquent property titles shift to the government.  
2. The former owners have until July 1—a three-month window—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 property is sold between August and November, after which the County treasurer notifies 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. At this point, property owners who actually survive the claim process will get their rightful surplus.

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

Lillian tried to follow the procedure, sending her completed claim form via USPS Priority Mail Express to meet the July 1 deadline. The form arrived at the County building on time. However, due to a missing suite number in the address, the treasurer retrieved the form from the mailroom on July 2. This one-day delay was all the County needed to justify keeping her home’s entire sale surplus. 

Jacqueline’s family didn’t fare any better. Her daughter, Johanna McGee, was appointed the personal representative of her mother’s estate a full year after her death. Johanna filed her claim in February 2022, citing a Michigan law allowing deadline extensions following a death. 

Both requests were rejected at the circuit court and on appeal. Lillian was faulted for using priority instead of certified mail, while Johanna was told her cited state law applied to pre-death, not posthumous, claims.   

This is not a fair process. Forcing property owners to chase down their own money through unfair processes means that homeowners lose their hard-earned home equity to the government. PLF’s research has found that fewer than 10% of property owners manage to navigate Michigan’s claim procedure, and nearly all require a lawyer’s help. 

The Michigan and United States Constitutions demand that government pay the owner for 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, the government must pay for it.

Now, Lillian and Jacqueline are fighting back. Represented by Pacific Legal Foundation at no charge, they’re asking the Michigan Supreme Court to confirm their right to just compensation without complicated claims procedures and unreasonably tight deadlines. 

This case is the latest in PLF’s ongoing work to defeat home equity theft across the country.