Michigan’s top court gives big victory to people trying to recoup cash from foreclosures

DETROIT (AP) — The Michigan Supreme Court said Monday that its 2020 decision stopping local governments from keeping cash windfalls from the sale of foreclosed homes can be applied retroactively, meaning that hundreds of millions of dollars could potentially be returned to people who lost properties over unpaid taxes.

Local governments were “essentially stealing from people,” said Christina Martin, an attorney at the Pacific Legal Foundation who argued the case for former property owners. “It doesn’t matter if it’s going to be expensive to pay them back. They have to pay them back.”

For years, counties kept profits from the sale of foreclosed homes or land — even if the leftover cash far exceeded the amount of unpaid property taxes. The Pacific Legal Foundation calls it “home equity theft.”

For example, Uri Rafaeli owed $8.41 in taxes on a rental property in Southfield. The bill grew to $285 with penalties and interest. Oakland County sold the house for $24,500 but kept the balance, which was legal at the time.

The Supreme Court in 2020 said the practice violated the Michigan Constitution. And now the court said the ruling can be applied retroactively to foreclosures that happened before the opinion was released four years ago.

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