Home to be built on foreclosed property, but changes coming to program

By: Kristyne E. Demske | St. Clair Shores Sentinel | Published August 13, 2021

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ST. CLAIR SHORES — A property acquired by the city in 2019 as part of the Macomb County Treasurer’s Office tax foreclosure program has been sold by the city for $20,000.

“We tore that house down as part of our anti-blight program,” Community Development and Inspection Director Chris Rayes said.

The remaining piece of property, at 21821 Eight Mile Road, is a triangularly shaped lot, he said, unlike other properties in the city. It is across the street from the city of Harper Woods. Rayes said the city has put just under $18,000 into the parcel due to acquisition costs, utilities and maintenance.

Councilman Chris Vitale said he hoped the unique floor plan being approved could lure a resident out of a downtown loft and into St. Clair Shores.

“I think it’s a great look,” he said. “The floor plan and the house itself remind me of a lofty look.”

The city had listed the property at $25,000, but Rayes said because of its unique shape, it was difficult to sell.

For many years, the city of St. Clair Shores has taken advantage of the option to purchase groups of properties and parcels foreclosed upon for back taxes and offered by the county for the price of those back taxes. However, a Michigan Supreme Court ruling, and the subsequent Public Act passed in 2020 to rectify what the court deemed unconstitutional, will bring changes to the tax foreclosure process.

The changes to state law may change the way St. Clair Shores is able to acquire the properties from Macomb County.

Public Act 255 of 2020 codified the Michigan Supreme Court decision in Rafaeli, LLC v Oakland County, amending the General Property Tax Act to prospectively provide an interest in surplus tax foreclosure sale proceeds, and a way that a person or entity with a former legal interest in a foreclosed property can claim an interest in any remaining tax foreclosure sale proceeds.

According to Paige Bachand, deputy treasurer of collection for the Macomb County Treasurer’s Office, a claimant seeking remaining proceeds (the amount above that which is owed to the government from the sale) from such a sale must notify the foreclosing governmental unit — in this case, the Macomb County Treasurer’s Office — by July 1 following the effective date of foreclosure.

The changes also affect how local units, like the city of St. Clair Shores, elect to purchase foreclosed property under the right of first refusal. If a claim for remaining proceeds has been made by a former holder of legal property interest, the local unit — the city — must pay fair market value for the foreclosed property. If no claim has been filed, however, the city can purchase the property under the first right of refusal for the minimum bid, which is equal to the taxes, interest and fees owed on the property. Prior to the institution of Public Act 255, which took effect Jan. 1, cities like St. Clair Shores could purchase all foreclosed properties under the right of first refusal for the minimum bid.

Rayes said paying the state equalized value of the property rather than the minimum bid might not be in the city’s favor. The Macomb County Treasurer’s office is not foreclosing upon any properties that have three years of back taxes owed until 2022, so no properties are available in 2021.

“It sounds like more of them will be going out to auction then,” Councilwoman Candice Rusie said.

City Attorney Robert Irhie said the court case called for making the tax foreclosure process fairer to those who had had their homes foreclosed upon because of taxes owed. He said the court found that not giving the former owners the excess profits amounted to a “taking without due process of law.”

“That whole process goes through a number of phases,” he said. “There may be a point toward the end where the city can step in and buy them in bulk at that time,” but the days of the city acquiring all the homes and properties foreclosed upon for just the amount owed in taxes is unlikely to occur as frequently as it had in the past.

The city of St. Clair Shores has used proceeds resulting from the sale of properties and homes it has renovated, which were seized for back taxes, to pay for playground equipment and other improvements to city amenities.