By John Vibes
After former Michigan resident Uri Rafaeli accidentally underpaid his tax bill by a mere $8.41, his home was seized by the local government who then sold the house for $24,500 and kept the money. Rafaeli originally paid $60,000 for the property, but the property was recently estimated to be worth $128,000 by Zillow.
In the state of Michigan, the government is allowed to take a resident’s home and auction it off to the highest bidder if property taxes are unpaid, thanks to a law passed in 1999 called the 123 Act.
According to Rafaeli’s attorneys, the state of Michigan has seized over 100,000 properties under the 123 Act since 2002.
Christina Martin, one of Rafaeli’s attorneys, has represented numerous other people in the state who have lost their homes under similar circumstances, on behalf of the nonprofit law firm Pacific Legal Foundation.
“Michigan is currently stealing from people across the state. Counties have been authorized to take not just what they are owed, but to take people’s life savings,” Martin told Reason.
There are now a series of class-action lawsuits against nine different counties in Michigan for taking the homes of innocent residents under dubious circumstances.
Private attorney Philip Ellison, who has been involved in some of these lawsuits, estimates that the state has taken roughly $36 million in assets from homeowners who fell behind on their property taxes. One of Ellison’s clients, Donald Freed, had 36 acres of property seized by the state over a $750 property tax bill. The state then auctioned the property off for $100,000 and kept the profits.
Furthermore, an investigation by Detroit Free Press found that the families of some of these politicians were buying up these foreclosed properties for bargain prices at auction after they were seized by the state.
After this transgression, the local politicians responsible were cleared of any wrongdoing, but in response, government employees and family members were banned from bidding on foreclosed homes. Oakland County Treasurer Andy Meisner said that this was merely to protect the government from claims of corruption.
The new law was passed “to avoid the appearance of the conflict of interest, or that somebody is using their position to get an advantage on someone who doesn’t have that relationship … We don’t want it to appear there’s any incentive on the part of the office to foreclose,” according to Meisner.
County officials admit that the push to collect back property taxes and foreclose on homes who fell behind was intended to help replenish struggling budgets, but critics say that the state is preying on poor and depending on people who are already in debt to replenish their coffers.
Provide, Protect and Profit from what’s coming! Get a free issue of Counter Markets today.