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Foreclosure Claims (PAs 253, 255 & 256)

Background

County treasurers use a variety of methods and numerous community resources to help people pay their taxes and prevent tax foreclosure. The Michigan Supreme Court recently ruled, however, that people who have property foreclosed for unpaid taxes have a common law right to any remaining proceeds from the sale of the property, after all the taxes, interest, penalties, fees, and costs have been paid. This decision is called Rafaeli after the person who began the case.

New legislation passed in December 2020 to amend state law to comply fully and fairly with the Michigan Supreme Court Rafaeli decision. The Michigan Association of County Treasurers supports the new laws.

Public Acts 253, 255 and 256 change current tax law to create a pathway to recouping the proceeds from a tax sale of their foreclosed property.

  1. The new public acts allow for the following:
    • People can request the remaining proceeds from the sale of a foreclosed property, even if they weren't able to pay their property taxes. This applies to both business and residential property owners.
    • The pathway starts with property owners filing their claim by July 1 following the date on which the property was foreclosed. This is for properties transferred or sold after July 17, 2020.
    • Foreclosed property transferred or sold before July 18, 2020 a claim may be made only if the Michigan Supreme Court orders that its decision in Rafaeli applies retroactively.
    • All taxes, interest, penalties and fees must be paid prior to any release of remaining proceeds.
    • People with delinquent property taxes will be notified several different ways and several different times about their option to receive remaining proceeds.
    • Cities, townships and land banks must pay fair market value for tax-foreclosed property they purchase under their "right of first refusal" so any remaining proceeds can go to former owners.
    • County treasurers are no longer required to keep those proceeds in a delinquent property tax fund, which often pays for the costs of handling foreclosures.
    • The laws allow the costs of foreclosure to be recovered in line with the Michigan Supreme Court decision.
  2. We believe this is a fair and equitable solution to the Michigan Supreme Court's July 2020 ruling that said county treasurers couldn't keep proceeds of tax sales.
  3. County treasurers use a variety of methods and numerous community resources to help people pay their taxes and prevent tax foreclosure.
  4. We prevented 97.5 percent of property tax foreclosures in 2019.
Poverty Exemptions (PA 253)
  1. People filing for property exemptions only have to do so every three years now, instead of every year. This is retroactive to exemptions filed in 2019.
  2. A city or township must first adopt a resolution to allow longer poverty exemptions for homeowners who remain eligible.
  3. The property owner must be on a fixed income solely from public assistance that is not subject to significant annual increases beyond the rate of inflation.
  4. If the owner sells the property, moves or experiences a change in household assets or income that would make them ineligible for the exemption, they have 45 days to notify the county treasurer's office. Otherwise they may have to repay their taxes with interest.