In July 2020, the Michigan Supreme Court issued a landmark decision in Rafaeli, LLC v Oakland County.
The Rafaeli the case involved a property tax foreclosure sale due to unpaid property taxes by Rafaeli. After the sale, Oakland County retained excess funds in excess of property taxes owed by Rafaeli. This was considered an unconstitutional take under the Michigan Constitution.
Following the Rafaeli decision, there have been several lawsuits brought by individuals seeking to reclaim their hard-fought equity taken by the government as a result of these sales. In addition to the lawsuits, the Michigan legislature enacted legislation that provided the framework for individuals to recover funds improperly withheld by the government.
MCL 211.78t states that people whose home has been foreclosed due to unpaid taxes on or after July 17, 2020 must file a form with the County Circuit Court for which their home has been foreclosed no later than next July. . Adding a layer of confusion, the Michigan State Department of the Treasury released the form (SCAO Form 5743) which states that the form can only be used for property tax foreclosure sales that occurred during or after 2021.
While the legislature paved the way for people whose homes were sold after July 2020, the legislature left many more whose capital was confiscated by the government without recourse.
Rather, MCL 211.78t states that people who had their home sold before July 17, 2020, and their remaining equity wrongly withheld, must wait for the Michigan Supreme Court to determine whether the Rafaeli the standard should apply retroactively.
While the Michigan Supreme Court has yet to weigh in, the Oakland County Circuit Court has.
The Rafaeli the case was referred to the Circuit Court by the Supreme Court only on the count of violation of the right to fair compensation / reverse conviction. The Supreme Court ruled that “the General Property Tax Act, which does not provide for the return of tax foreclosure sales proceeds beyond tax and other charges, is an unconstitutional decision under the Michigan Constitution.”
Following the referral, the defendant Oakland County filed a motion for summary determination with the Circuit Court. In ruling on the motion, the Circuit Court allowed the motion stating, in part, “the opinion of the Supreme Court should be applied prospectively. [not retroactively] effective July 17, 2020, as it sets aside a precedent set and resolves a first-impression question whose resolution was unanticipated. The court further ruled that the defendant and other county treasurers relied on the law for twenty-one years prior to this ruling. The court said the ruling was in the “interests of justice”. In short, the court ruled that justice would be better served by allowing counties and their treasurers to keep these illegally taken funds because “that’s the way it was.” Plaintiff Rafaeli has already appealed the decision and filed his initial brief.
It is still unclear how the Michigan Supreme Court will rule. It seems that the Rafaeli the case is on a fast track back to the Supreme Court for the advice sought by individuals and the legislature. Of note, there are a number of cases that have been filed in state and federal courts which have applied the Rafaeli standard retroactively.
If your property has been foreclosed on due to unpaid taxes and you want to better understand your rights to receive government-held surplus funds, contact Grewal Law PLLC.