80 of Michigan's 83 counties are getting sued over tax foreclosure surpluses | Michigan Radio
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80 of Michigan's 83 counties are getting sued over tax foreclosure surpluses

Dec 24, 2018

Soon, nearly all Michigan counties will be facing lawsuits over whether they can keep any profits from selling tax-foreclosed homes.

Current Michigan law allows county treasurers to keep any difference between the amount of delinquent property taxes, and whatever the property sells for at auction. So in theory, if a home with $3,000 in back property taxes sells for $100,000, the county pockets a $97,000 surplus.

A tax foreclosure auction.
Credit Steve Carmody / Michigan Radio

But attorney Philip Ellison says they should only be allowed to keep the amount of back taxes the property owner owed. Otherwise, “Essentially, it’s the government stealing from the citizenry.”

So Ellison is filing class-action lawsuits against 80 of Michigan’s 83 counties. The three counties not included are Wayne, Oakland, and Macomb counties, which together account for the bulk of the state’s tax foreclosures.

But the Michigan Supreme Court has already agreed to hear a case out of Oakland County that makes the same argument. Ellison says if the former property owners win that case, his class-action lawsuits will benefit everyone else who’s suffered tax foreclosure by entitling them to their former home equity seized by the government.

“So the Supreme Court’s decision is going to have a major impact on people throughout the entire state of Michigan,” he said.

Ellison’s firm has already filed lawsuits in all counties roughly north of the Flint area, he said. He plans to file all the lawsuits by New Year’s.

Separate lawsuits in various Michigan counties have attempted to make this argument in federal and lower state courts before. The federal courts have largely sidestepped the issue, deeming it a case for state courts. State courts, including the Michigan Court of Appeals, have ruled the counties’ taking of the property’s whole value legal as a form of civil asset forfeiture.