Have you ever miscalculated a bill? Typically, a late fee or a strongly worded warning follows. But do you know what happens if you miscalculate and underpay your property taxes—even just a few dollars? In at least 12 states, the government can seize your property, sell it, and leave you with nothing.
Property taxes must be paid, and it’s legal for governments to seize your home to pay for outstanding debt. But the government shouldn’t keep any more money beyond what’s owed. The rest is your property: home equity that you’ve worked hard to build.
In the courts and in legislatures, Pacific Legal Foundation fights to preserve your property rights to home equity and prevent governments from preying on citizens to steal their nest egg.
Consider the case of Uri Rafaeli, who owned a rental property in Oakland County, Michigan. He mistakenly underpaid his property taxes by $8.41. To cover the debt, the county sold the property at auction for $24,500 and kept every penny of the proceeds. Mr. Rafaeli is fighting the theft of his home equity at the Michigan Supreme Court, which will hear oral arguments in the fall of 2019.
Why would governments do this? We’ve found two reasons:
- Local governments can pad their budgets with stolen equity. In Detroit, there’s a budget line every year for expected windfalls from home foreclosures.
- Some politicians use the system to reward their friends and family with homes priced below market. In Montana, before the practice was banned, local treasurers sold foreclosed homes to preferred private investors. In Michigan, local officials funnel auctioned properties to their family and connected businesses at a discount.
PLF is fighting home equity theft in the courts and legislatures.
- The Michigan Supreme Court will hear arguments this fall in Rafaeli v. Oakland County and consider whether the practice is unconstitutional under the U.S. Takings Clause and Michigan Constitution.
- The Montana legislature recently passed a bill (SB253) banning this practice, in consultation with PLF. Attorney Christina Martin had spoken to legislators and consulted on drafting SB 253, which both sides of the aisle passed overwhelmingly. Now, no Montana home can be transferred to private investors without compensation to owners.
- PLF is looking to end home equity theft in the other states where it’s legal. Submit your case if your home equity has been stolen.