Michigan Court Supports Homeowners in Foreclosure Case

In a significant ruling, the Michigan Supreme Court addressed the controversial practice of local governments retaining surplus proceeds from tax foreclosure sales. The case stemmed from the situation of Southfield homeowner Rafaeli, who faced property seizure after underpaying his taxes by a mere $8.41. Despite the home being auctioned for $24,500, significantly below its estimated value of $130,000, the county retained the surplus of $24,215, amounting to an astonishing 8,496% of the original tax debt. The court's decision, delivered in 2020, declared it unconstitutional for local governments to keep excess funds from such sales. This ruling aligns with a similar case involving Geraldine Tyler, a retired county worker, whose property was sold for $40,000 to cover a $15,000 tax debt. The Supreme Court ruled that while the county could recover the owed amount, it could not retain the surplus, reinforcing the principle of just compensation in cases of constitutional takings. Justice Brian K. Zahra, writing for the majority, emphasized the importance of adhering to traditional legal standards and ensuring that individuals are returned to their prior status following wrongful seizures. The ruling not only impacts Rafaeli and Tyler but also sets a precedent for all Michigan residents who have faced similar situations, ensuring that surplus proceeds from tax foreclosures are returned to property owners rather than kept by local governments.