A widow is appealing to the U.S. Court of Appeals for the 6th Circuit over a court ruling dismissing her claim that local governments in Michigan seized her family’s home over a tax debt and then refused to compensate her for the home equity in the property she lost.
The unfavorable ruling came despite the fact that the Michigan Supreme Court has ruled that counties may not keep for themselves as a windfall funds left over from the sale of real property for unpaid taxes, an unconstitutional practice the property owner’s lawyers denounce, calling it “home equity theft.”
The case is “about a city using a predatory tax law as an engine for its other government purposes, and to enrich private companies,” Christina M. Martin, a senior attorney at the Pacific Legal Foundation (PLF), told The Epoch Times. PLF is a Sacramento, California-based national public interest law firm that represents injured clients free of charge.
“So the government says that since it didn’t make any money, it doesn’t have to pay these property owners anything,” Martin said.
“But the bottom line is, the government took these homes that were worth far more than any of the homeowners owed the government. And the government should have to pay just compensation for that surplus that it took.”
According to the brief, the county took the homes of eight appellants to satisfy tax debts in amounts far below the value of their homes, receiving “a huge windfall at the expense of the homeowners.” The only compensation they received “was forgiveness of the debts that were worth much less than their homes.”
The case goes back several years when Tawanda and Prentiss Hall fell behind on their property taxes and set up a payment plan with their local government so they wouldn’t lose the Southfield, Michigan, home where they lived with their children. Tawanda Hall is one of the eight former property owners suing in federal court.
But Oakland County terminated the Halls’ plan when their tax debt stood at $22,642, and foreclosed on their home.
Instead of selling the house at public auction, paying off the debt, and returning the surplus—minus interest and penalties—to the homeowners, the county used the Halls’ money to “enrich” a private company, Southfield Neighborhood Revitalization Initiative LLC, which is managed by Southfield city officials.
“Through a series of legal transactions, the county took the Halls’ home (and the homes of seven other homeowners party to this case) and transferred it through the City of Southfield to the Revitalization Initiative, which sold it for more than $300,000. The Halls received none of the difference between the debt they owed and the sales price,” PLF said in a statement.
This public-private arrangement was established in 2016 by a city resolution. Southfield relies on a state law allowing cities a “right of first refusal” to buy foreclosed homes from the county for the cost of tax debt. “The Southfield Non-Profit Housing Corporation reimburses the city for the amount of the tax debt, and turns the properties over to the for-profit Revitalization Initiative—for $1—to be fixed up and sold,” PLF said.
Citing a Detroit News report, PLF stated that the “company generated as much as $10 million from 138 properties from 2016 to 2019 after covering more than $2 million in tax debts to acquire the properties from the city. The former owners of these properties lost everything and received nothing from the surplus value of the properties taken from them.”
PLF stated that one court described the system as “troubling,” “shocking to the conscience,” and stated that it “rightfully breeds distrust among the electorate.”
The saga took its toll on the Halls. “Six months after the family was forced to move, an exhausted and overworked Prentiss died from a brain injury sustained in an on-the-job fall—he was 52,” PLF said.
PLF argues that a victory in this case would finish what the firm started in Rafaeli LLC v. Oakland County, when the Michigan Supreme Court ruled unanimously to end home equity theft through government foreclosure auctions.
Court documents in that case indicated the plaintiff, who had bought the rental property in Southfield for $60,000, owed $8.41 in unpaid property taxes from 2011, which grew to $285.81 after interest, penalties, and fees. Oakland County foreclosed on the property for the delinquency, selling it at auction for $24,500, and keeping all the sale proceeds in excess of the taxes, interest, penalties, and fees.
Oakland County, Michigan, Treasurer Robert Wittenberg commented by email on the new appeal.
“Although the Oakland County Treasurer’s Office does not comment on pending litigation, we place a high priority on helping our residents and business owners to retain their properties while complying with Michigan law. Our commitment—to fulfill our statutory responsibilities, prevent tax foreclosure and the loss of property ownership rights in Oakland County—is unwavering.”
The Epoch Times also reached out to the city of Southfield for comment on the new appeal but didn’t receive a reply by press time.
