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Michigan Man Claims His Property Was Seized After He Underpaid Property Taxes By $8.41
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The county government seized a Michigan man’s property after an accounting error led to him underpaying his property taxes by $8.41. His property was then auctioned and sold for less than he paid for it and for far less than what it was worth. The county kept the profits from the sale.

Uri Rafaeli, 83, purchased a home and property in Southfield, Michigan, which Reason described as “a lower-middle class suburb just north of Detroit.” Rafaeli purchased a three-bedroom, 1,500-square-foot home in the area in 2011 for $60,000, telling Reason it was “good to the state economy, and [at] the same time, it may produce a good rent for my retirement.”

The purchase was recorded in January 2012. Six months later, Rafaeli was told that he underpaid his 2011 property taxes by $496.

“Rafaeli made subsequent property tax payments on time and in full—and, in January 2013, he attempted to settle the unpaid tax debt, according to court documents,” Reason reported. “But he made a mistake in calculating the interest owed, resulting in another underpayment of $8.41.”

For that, Oakland County put his property up for auction along with about 11,000 others. The property seizure was part of a Michigan law pass in 1999 that allows such government acquisitions. The law was supposed to help rehabilitate abandoned properties, but has resulted in county treasurers seizing properties to collect revenue based on their sales.

“In the process, it creates a perverse incentive by allowing treasurers’ offices to retain excess revenue raised by seizing and selling properties with delinquent taxes—even when the amount owed is miniscule, and even when the homes aren’t abandoned or blighted at all,” Reason reported.

Rafaeli is a victim of the law and is part of a class-action lawsuit that is set to be heard before the Michigan Supreme Court this month.

The county ended up selling Rafaeli’s property for $24,500 – about $35,000 less than he bought it for and more than $100,000 less than it was valued. Rafaeli was not able to pocket the money from the auction; the county kept that for itself.

“I believed in the power of the U.S. to withstand the difficulties,” Rafaeli told Reason, “and I believed in its fairness and dignity in doing business there.”

Rafaeli is represented by attorneys with the Pacific Legal Foundation, which says more than 100,000 properties have been confiscated in Michigan since 2002.

“In thousands of instances each year, the proceeds for a given property sold at auction far exceed the delinquent tax amount and are far less than a delinquent taxpayer’s equity in the property,” the law firm said. “This results in millions of dollars in surplus proceeds and equity for the counties and tax sale purchasers.”

Reason reported that Wayne County has “funneled more than $382 million in delinquent tax surpluses into its general fund budget since 2012,” thanks to this tactic.

Philip Ellison, a private attorney who has worked on class-action lawsuits regarding this law, told Reason that the process was “government-sanctioned theft.”

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