The American dream has long been to own property and investments. Erica Perez owned both, and Wayne County has turned her dream into a nightmare. Perez bought a small apartment building and a separate home in Detroit. She used these to earn rental income. But due to an accidental underpayment on her 2014 taxes on one property (she paid all the other taxes she owed), Wayne County foreclosed on both properties. Because Perez underpaid her tax bill by $144 (and then incurred $357 in interest, penalties and fees), the county took the two properties, with a combined value of more than $100,000. And then came the ultimate insult. The county auctioned off the properties and kept the full proceeds. The properties sold for $107,498.55, which the county kept — all for a tax debt of $501.
The Constitution provides that private property shall not be taken without just compensation. And while government may seize properties to enforce taxes, it has no right to take more than it is owed. But about a dozen states purport to authorize exactly the type of legalized theft that Wayne County used.
Some states, like Montana and Wisconsin, have recently enacted legislation to put a stop to this “tax-and-take” scheme. And so did Michigan, after the Pacific Legal Foundation secured a ruling from the state Supreme Court in Rafaeli v. Oakland County (2020). That case held that surplus proceeds from tax foreclosure sales must be returned to the property owner. It left an outstanding question, though. Was this decision retroactive, so that it would help Perez and others who had already lost their property and their investments, or did it only affect future tax foreclosures?
The Mackinac Center Legal Foundation is working with the Pacific Legal Foundation, a nationally recognized law firm specializing in protecting property rights, to fight for Perez and get her money back. A hearing was held on March 10 in the Wayne County Circuit Court. The Pacific Legal Foundation and the Mackinac Center await the judge’s opinion.