PLF client Uri Rafaeli accidentally underpaid the property taxes on his Southfield Michigan house by $8.41. So Oakland County took Rafaeli’s house to collect on the small debt. The County also took PLF client Andre Ohanessian’s 2.7 acres of valuable land in Orchard Village to collect a $6,000 debt. The County sold both properties and kept all the profits. This was a devastating blow to both former owners whose equity was taken by the County as a massive windfall.
The Michigan Supreme Court agreed to hear Rafaeli and Ohanessian’s constitutional challenge to the County’s theft of their home and land equity.
Their stories have attracted national attention. Groups and individuals with diverse perspectives are urging the court to protect Michaganders’ rights by ruling for Rafaeli and Ohanessian. AAPR, Institute for Justice, Buckeye Institute, Center for Constitutional Jurisprudence, and various individuals who similarly lost homes over small debts have recently filed a total of six friend-of-the-court briefs supporting Rafaeli and Ohanessian’s constitutional rights:
- A brief filed on behalf of a wealthy individual described how Cass County, Michigan took his $3.5 million lakefront home as payment for a small debt. County emails say that the county treasurer was “tickled pink” to foreclose and reap the profits, and additional evidence showed the tax collectors knew the owner could pay and knew exactly how to get in touch with him, but instead did the bare minimum required by state law in hopes of foreclosing on the property for a profit.
- AARP’s brief explained how the General Property Tax Act violates constitutional property rights and especially harms the elderly, who for example are more likely to suffer from medical emergencies and dementia.
- Institute for Justice filed a brief rebutting the County’s argument that the confiscation of the home and land equity is justified by the Supreme Court’s civil forfeiture decisions. Even if it were a civil forfeiture it would be unconstitutionally excessive.
- Ohio’s Buckeye Institute filed a brief that urged protection of constitutional rights and demonstrated how when private companies collect on private debts, they are barred from stealing equity, unlike Michigan counties.
- Center for Constitutional Jurisprudence explained how individual rights in property are the basis of liberty and that Oakland County undermines constitutional rights by taking and keeping more than it is owed in taxes, interest, penalties and costs.
- A brief filed on behalf of multiple former homeowners describes how they lost essentially their life savings and explains the destructive, statewide impact of counties across the state collecting more than they are owed by seizing properties as payment for small debts.
While Rafaeli and Ohanessian enjoyed a broad base of support, Oakland County received three briefs—all from Michigan government groups. In other words, the only people supporting Oakland County are profiting from Michigan’s predatory tax collection scheme.
One of the main government arguments in favor of seizing full title (and all equity) to property as payment for a small debt is that Michigan governments are using the profits to pay to eradicate blight and to serve other public purposes. But as we explain in our reply brief, which we filed Wednesday, the Supreme Court has warned that “a strong public desire to improve the public condition is not enough to warrant achieving the desire by a shorter cut than the constitutional way of paying for the change.”
The takings clauses in the Michigan and U.S. Constitutions require that the County pay just compensation for this home and land equity. Traditionally, that meant that government could take property to satisfy a tax debt, but government would have to sell the property and refund the extra profits back to the former owner. Michigan—along with a minority of other states—broke from this tradition by allowing government to take more than it was owed. And that created a perverse incentive for Michigan government to foreclose on property for even as little as an $8 tax debt.
This is unjust and it must end. We are hopeful that the Michigan Supreme Court will vindicate Rafaeli and Ohanessian’s rights and thus, the rights of all people in Michigan.