November 29, 2018

Good news in fight to end Michigan’s tax foreclosure abuse

By Christina M. Martin Attorney

In 2011, PLF client Uri Rafaeli of Oakland County, Michigan, accidentally underpaid property taxes by $8. He paid all the following years’ taxes on time. But in 2014, after making his first tax payment for the year, he discovered that the County had foreclosed on his home to collect the $8 debt, plus about $277 in penalties, interest, and fees. The county sold the house for almost $25,000, but refused to refund the profits that exceeded Rafaeli’s tiny debt.

PLF client, Uri Rafaeli

Likewise, Andre Ohanessian’s foreclosed property was sold for $82,000. He owed only $6,000 in back taxes, but Oakland County kept every penny from the sale. Michigan’s property tax law specifically authorizes counties to profit in this manner, so similar horror stories can be found throughout the state.

Almost one year ago, we asked the Michigan Supreme Court to review Rafaeli’s and Ohanessian’s cases. We explained that the U.S. Constitution and the Michigan Constitution limit the government’s power to take property. Although a tax collector may take the property and sell it to pay a debt (taxes, penalties, interest, and fees), the Fifth Amendment’s Takings Clause and Article X, Section 2 of the Michigan Constitution require that the government return the extra profits to the former owner.

In this case, that means the county should refund $24,215 to Rafaeli and $76,000 to Ohanessian. We want justice for our clients and for others in the same predicament, and we’ve long awaited the court’s response.

On November 21, we received good news: the Michigan Supreme Court agreed to hear our appeal on behalf of Rafaeli and Ohanessian. We’re happy the court has agreed to decide whether Michigan courts will finally recognize that home, business, and land equity is property that deserves all the protections of the state and federal constitutions.

For most people, their home and land equity is their life’s savings. Michigan counties are stealing this equity—collecting far more than what is owed in taxes, penalties, interest, and fees. The Michigan Supreme Court has an opportunity to restore our clients’ rights and the rights of many other people who have been victimized by Michigan’s tax foreclosure law.

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Rafaeli, LLC v. Oakland County

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 has asked the Michigan Supreme Court to strike down this bureaucratic theft and restore our clients’ constitutional rights.

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