In 2014, Oakland County, Michigan foreclosed on a home owned by Uri Rafaeli’s business—Rafaeli, LLC—over an $8.41 tax debt. The County sold the property for $24,500, and kept profits. Ditto for Andre Ohanessian, when the County seized and sold his property for $82,000, and pocketed every penny left over from the $6,000 tax debt. While most states refund the surplus, Michigan is among a handful of states that allow property theft to fill government coffers. PLF asked the Michigan Supreme Court to strike down this bureaucratic theft and restore our clients’ constitutional rights.
In 2011, Uri Rafaeli’s business—Rafaeli, LLC—purchased a modest rental property in Southfield, Michigan for $60,000. Rafaeli inadvertently underpaid the property’s 2011 taxes. He paid his 2012, 2013 taxes in full. After learning he owed money for 2011, Rafaeli tried to pay the full 2011 tax debt in January, 2013. But he mistakenly did not factor in interest growing on the debt, and underpaid by $8.41. The County foreclosed on the property, sold it for $24,500, and pocket the massive windfall at Rafaeli’s expense.
Similarly, Andre Ohanessian owed $6,000 in taxes, penalties, interest, and fees when the County foreclosed and sold his property for $82,000. As with Rafaeli, the County kept all profits from the sale, rather than reimbursing Ohanessian.
Rafaeli and Ohanessian are not alone. Unlike most states which refund such surplus, Michigan is among a handful of states that allow property theft to fill government coffers. In fact, thousands of property owners across Michigan have lost valuable property to pay debts, even very small ones. This predatory government foreclosure process is a particular threat to the elderly, sick, and economically distressed.
Rafaeli and Ohanessian sued, saying that the government unconstitutionally took their property without just compensation when it kept the proceeds from the sales. PLF filed an amicus brief in their support in the Michigan Court of Appeals. That court ruled against them, dangerously expanding civil asset forfeiture law to include non-criminal activities, and upholding this bureaucratic theft.
Represented by PLF, Rafaeli and Ohanessian asked the Michigan Supreme Court to vindicate their constitutional property rights and set a precedent that will protect thousands more property owners from bureaucratic theft. The court agreed, striking down the practice of home equity theft in Michigan.