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Can Oakland County confiscate a citizen’s personal property for $8.41 in unpaid taxes? This question will likely be answered by the Michigan Supreme Court later this year.
The case at hand involves Uri Rafaeli, who failed to pay the interest owed on property taxes for a rental property in Southfield several years ago. Oakland County eventually foreclosed on his property for the $8.41 plus $277 in additional interest and fees. Similarly, Oakland County seized Andre Ohanessian’s property in Orchard Village for a $6,000 tax debt.
The county proceeded to auction Rafaeli’s property for $24,500 and Ohanessian’s property for $82,000 — and then kept the surplus proceeds. Lower state courts have agreed the officials acted properly under Michigan’s General Property Tax Act, which requires officials to take property for any amount of unpaid taxes and keep all the proceeds if they sell it.
However, attorneys for Rafaeli and Ohanessian argue that the law is unconstitutional, at least as applied by Oakland County officials. “Whether considered a taking or a forfeiture, the confiscation of surplus equity fails the Michigan Constitution, the United States Constitution, and the central purpose of government: the protection of individual liberties and property,” noted the plaintiffs’ brief requesting a hearing before Michigan’s highest court.
The Takings Clause of the Fifth Amendment to the U.S. Constitution states the government cannot take private property “for public use, without just compensation.” Article X, Section Two of the Michigan Constitution states “private property shall not be taken for public use without just compensation,” and it goes on to specify that public use does not include “the taking of private property for transfer to a private entity for the purpose of economic development or enhancement of tax revenues.”
Oakland County has certainly enhanced its tax revenues through property takings. The county made $22.5 million from tax foreclosure auctions from 2006-15, according to The Detroit News. Oakland isn’t the only county profiting from property takings. Thousands of properties across the Wolverine State are seized and sold for tax debts each year. In fact, attorney Philip Ellison has filed lawsuits against several counties for keeping the profits from tax auctions, including a class action lawsuit over the practice.
Unfortunately, Michigan isn’t the only state where this shady practice of property-taking occurs. Massachusetts, Minnesota, North Dakota and Oregon have laws that either require or allow the government to keep all the profits from the sale of private property.
Of course government officials have the right to seize property for nonpayment of taxes and sell it to satisfy the debt. Yet Michigan residents should be outraged that government officials are seizing the equity the owners have in their property — far in excess of the taxes owed — potentially leaving them with mortgage payments for property they no longer own.
The Michigan Supreme Court is expected to hear oral arguments in this case after reviewing the written briefs and could issue an opinion later this year. If the court fails to protect the rights of Michigan property owners, hopefully the Legislature will right this wrong.
[Originally Published at the Detroit News]