Matt Schafer found a purpose with the Michigan National Guard and a livelihood as a long-haul trucker, and in 2009, he found the perfect home.
He had just returned from the first of three overseas deployments for the National Guard and felt a growing need to balance life on the road. The 1950s-era home in West Michigan’s Kent County was mostly concrete with tunnels under the yard that appealed to his military sense of security. He bought the house at auction, paying in full to avoid the hassle of mortgage payments while away for work and National Guard duty for weeks at a time.
Property taxes, however, slipped through the cracks and in 2017, while he was out of town for National Guard drills, Kent County foreclosed on his home and sold it at auction.
Matt owed $5,300 on his property that was worth nearly $96,000. The county took his property and sold it at auction for $51,500, but instead of keeping only the amount Matt owed, the county kept every last dime of the $46,200 in equity he retained in the home.
A home’s equity is just as much property as a home itself and is just as protected by the Constitution. When the government takes private property to satisfy a tax debt, it should take only what is owed. The Michigan and U.S. Constitutions both demand that government refund any surplus as just compensation. Yet, home equity theft had been legal for years in more than a dozen states and DC.
Unfortunately for Matt, this government-sanctioned property theft would be allowed in Michigan for another three years.
In July 2020, the Michigan Supreme Court’s ruling in Rafaeli v. Oakland County recognized that it’s unconstitutional for counties to steal the savings people have stored away in their homes. 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.
Matt filed a class action lawsuit against Kent County in state court seeking what’s rightfully his—the surplus sale proceeds—and to protect other property owners’ rights to do the same.
The county attempted to justify its actions by claiming that because Rafaeli didn’t specifically mention retroactivity, it doesn’t have to pay for most home equity theft committed prior to Rafaeli. The trial court disagreed and ruled in Matt’s favor. The Michigan Court of Appeals affirmed Matt’s win, but the county asked the state supreme court to weigh in.
A court decision’s date doesn’t dictate the beginning or end of property rights. The Michigan Supreme Court in Rafaeli and the U.S. Supreme Court in Tyler v. Hennepin County both recognized that property interests at stake in government tax foreclosures are deeply rooted and pre-exist state law. Property cannot be taken without just compensation, no matter when the taking happens.
Represented by PLF at no charge, Matt and other Kent County property owners are urging Michigan’s high court to finish what it started in Rafaeli and confirm their constitutional right to just compensation, regardless of when the government unlawfully takes private property.
This case is the latest in PLF’s ongoing work to defeat home equity theft across the country.
What’s At Stake?
- Government can take property to collect unpaid taxes, but taking more than it is owed is legalized home equity theft. Delinquent property taxes don't entitle the government to take more than it is owed.
- The Michigan Supreme Court and the U.S. Supreme Court both recognized that private property rights are deeply rooted, pre-existing state law, and cannot be taken without just compensation, no matter when the taking happens. Those rights don’t begin after a court decision.
