Reclaiming Surplus Proceeds from Property Tax Foreclosures in Michigan

In the July 2020 ruling of Rafaeli, LLC v Oakland County, the Michigan Supreme Court unanimously agreed that foreclosing government units that auction off property to satisfy tax debts must return all surplus proceeds to the title owners at the time of the foreclosure.

The court held that when the county failed to return the difference between the sale proceeds and unpaid taxes, interest, penalties, and fees, they violated the Michigan Constitution’s Takings Clause.

Having concluded that the county committed a taking, this landmark ruling effectively struck down the practice of home equity theft in Michigan. It was a crucial victory over the government’s abuse of power and unjust forfeitures.

In December 2020, the Michigan Legislature amended the General Property Tax Act to create procedures for tax-foreclosed property owners to claim any surplus proceeds.

File for Surplus Proceeds

If you had a property that sold in a tax foreclosure after July 17, 2020, you may notify the foreclosing governmental unit, or “FGU,” that you intend to claim any surplus proceeds from their sale. You may also be able to claim surplus proceeds if your property was foreclosed in previous years but was not sold until after July 17, 2020.

The deadline for filing a claim is July 1, 2021. In 2022 and going forward, the July 1 deadline will remain, but only allow properties foreclosed at the start of that year.

The deadlines and paperwork can be confusing.  There are motions that need to be filed with the applicable court in order to recover proceeds.  There are also strict deadlines when those motions need to be filed.  One of our attorneys at Acclaim Legal Services can help you through the process of claiming your surplus proceeds, making sure you have the correct information for your property and meet all of the deadlines. 

Retroactive Proceeds

What about properties that went into foreclosure before the Michigan Supreme Court ruling? There is potential for retroactive payments to foreclosed properties that pre-date the court ruling. The General Property Tax Act established a separate procedure for retroactive payments in the legislator. If the Court decides to enforce that ruling, many previous tax foreclosures could receive proceeds from their sale.

Get Help from Acclaim Legal Services

Given the several procedural requirements and deadlines that must be met to potentially recover surplus proceeds from a tax foreclosure sale, you should seek knowledgeable legal counsel.

That’s where Acclaim Legal Services can help. Our attorneys are experts at handling property tax situations.

With 7 offices spread throughout Michigan, we have helped over 14,000 clients find a positive resolution to their problems. We are more than happy to help you too!

Give us a call on 866-261-8282 to speak to one of our attorneys or schedule a free, confidential consultation to learn more about your rights after a tax auction.