Posted on 08/01/2025 7:18:05 AM PDT by Twotone
Michigan's highest court this month dealt another blow to the practice known as home equity theft, further chipping away at the state's ability to seize people's homes and keep the profits when owners accrue modest tax debts.
That such a decision was necessary is troubling for a few reasons. There is, of course, the perversion of the practice itself, which has seen the government rob people effectively of everything they have when they're already down on their luck. Michigan woman Tawanda Hall, for example, fell $900 behind on her property taxes; with penalties, interests, and fees, she owed $22,642. So Oakland County, Michigan, seized her home and sold it. The final price exceeded $300,000, about $286,000 more than what she owed. She didn't get a dime.
Also vexing is that the Michigan Supreme Court ruled home equity theft unconstitutional in 2020. The plaintiff in that case, Uri Rafaeli, underpaid his tax bill by $8.41, setting in motion a series of events that saw the government seize his property, sell it, and keep the surplus equity. That violated the Takings Clause of the Fifth Amendment, the court said, which pledges that people must receive "just compensation" when the government usurps private property. Put more plainly, the government can take property to satisfy a debt, but it cannot then pocket the profit. (In 2023, the Supreme Court confirmed this principle in Tyler v. Hennepin County, a case brought by a Minnesota woman who lost her condo and all of its equity over a modest tax debt.)
But Michigan has tried to evade some of the implications of that landmark state ruling. The most recent case before the court, Jackson v. Southfield Neighborhood Revitalization Initiative, is a good example of that. Here, the government declined to put homes up for public auction and instead sold the properties to the city of Southfield, Michigan, for a minimum bid. The government then transferred the homes to the Southfield Neighborhood Revitalization Initiative (SNRI), a government-managed nonprofit, allowing the LLC to sell the properties and enrich itself—at the expense of the former owners.
Hall is intimately familiar with that runaround. Oakland County sold her home to the city of Southfield for about $23,000—the value of her debt, such that there was no surplus equity to speak of. It then transferred it to the SNRI, which sold it for $308,000 and kept the proceeds. The government told Michigan's supreme court that its creative escape hatch did not constitute a taking.
The court disagreed. "The government cannot evade long-established methods of disposing of foreclosed properties through public sale and simply keep highly valuable property for itself, avoiding paying any compensation to homeowners," wrote Justice Richard Bernstein. "Such a practice would allow governments to circumvent Rafaeli and render its constitutional holding inert for property owners affected by similar takings."
Christina Martin, a senior attorney at the Pacific Legal Foundation who represented the plaintiff in Tyler and litigates such cases across the U.S., said in a statement via email that the justices "rightly affirmed that the government can't take more than it's owed and can't sidestep the law to enrich itself at the expense of vulnerable property owners." The decision, she added, "ensures that [Rafaeli's] protections have real, lasting power."
Interestingly, one former Michigan justice saw the need for this coming. "Governmental units have numerous opportunities to purchase the property for the minimum bid, i.e., for the debt (and costs), and thus obtain it for an amount that will usually be much less than fair market value," then-Justice David Viviano noted in a concurring opinion in Rafaeli (which, as I recently wrote, are underrated for reasons like this). "Yet in those cases, too, because no surplus would result, the majority leaves the taxpayer without a remedy."
Homeowners who fall behind on their property taxes in Michigan are not out of the woods yet. After the ruling in Rafaeli, the state passed a convoluted debt collection statute that sends people on an obstacle course to get their equity back. Not everyone completes it successfully. Chelsea Koetter, who is suing to overturn the law, lost her home over a $3,863.40 tax debt, which the government then auctioned off for a $102,636 profit.
She would not see any of that, she was informed, because she turned in a form eight days late.
I wasn’t sure I liked Trump idea to eliminate property taxes nationwide (since each state will still collect their taxes one way or another)... but this is warming me up to the idea. A lot.
Good. This and “Civil asset forfeiture” are just evil.
Property taxes are flat out robbery. It’s like paying off a car, but the bank still wants you keep paying for that car for as long as you own it!
It’s insane!
Property tax: of all the different “taxes” that mankind has manged to foist upon its fellow travellers, property tax is by far the most insidious, evil tax there is.....outright legalized theft no matter how one looks at it.
Our Founders tried to LIMIT government. Should’ve been a civil rights amendment against any taxation other than a sales tax. That might’ve done the trick.
There needs to be prosecution of these government the thieves or we are going to need more Killdozers.
I get it. But how are municipalities to pay for city services, if not with property taxes?
sales tax, tuition charges for chillin in govt indoctrination centers, flat tax on income, etc. all possibilities but most of all SPEND LESS!!
For which you can than academic economist, Henry George, a hardcore socialist.
I hit the post too soon - charge those who receive their “services” for each “service” received I already pay for garbage collection and city water, since as near as I can tell the city does no road maintenance, I shouldn’t be charged for that, but if they do, spread it evenly over every city resident, so back to the flat tax
There is always rule 338 or rule EFP; however, I would not resort to these except in really dire circumstances.
Jailing the govt filth who do these things would deter others.
The property tax is just their way of confiscating your property. Their eagerness to take it all at once shows this.
Charge the city residents directly for services, not too hard.
And if a family with several children can’t afford public school tuition, what then? Street maintenance? (such as it is -— in our town, it’s pitiful).
Public schools spend huge amounts catering to the sports crowdwhile ignoring real education.
This is truly shocking. Someone somewhere is making the decision to do this, and I’d like to see some NAMES mentioned. It’s not just “the government” doing it. It’s people. Who are they?
How does the richest state in the land survive with 0 property taxes?... Florida
Florida has property taxes.
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