Michigan Supreme Court Rules on Foreclosure Cash Windfalls

In a significant ruling on Monday, the Michigan Supreme Court determined that its 2020 decision prohibiting local governments from retaining excess funds from the sale of foreclosed homes can be applied retroactively. This decision could lead to the return of hundreds of millions of dollars to individuals who lost their properties due to unpaid taxes. Christina Martin, an attorney representing former property owners, emphasized that local governments had been "essentially stealing from people" and insisted that they must repay the surplus amounts, regardless of the financial implications. The case highlighted the story of Uri Rafaeli, who faced a tax bill that ballooned from $8.41 to $285 due to penalties and interest. After Oakland County sold his property for $24,500, the local government retained the surplus, a practice deemed unconstitutional by the Supreme Court in 2020. Justice Brian Zahra, writing for the court, acknowledged the violation of constitutional rights and stated that no government entity could justify such actions based on statutory law. The Michigan Municipal League, representing local governments, opposed the retroactive application of the ruling, arguing that communities should not be penalized for adhering to previous legal standards. They warned that the financial repercussions could lead to "potential fiscal chaos," forcing local governments to either cut services or increase taxes and fees to address budget shortfalls. As a result of this ruling, tens of thousands of individuals may now be eligible for compensation, marking a pivotal moment in the ongoing debate over property rights and government accountability in Michigan.