Supreme Court: Oakland County at fault in foreclosure case

By: Tiffany Esshaki | C&G Newspapers | Published July 20, 2020

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OAKLAND COUNTY — Last week, the Michigan Supreme Court ruled against Oakland County in a case that essentially puts an end to the county selling tax-foreclosed homes at auction for a profit.

And it all started with a back tax bill of $8.41.

The court ruled unanimously last week that Southfield resident Uri Rafaeli's constitutional rights were violated when his property was foreclosed on for a delinquent county tax bill for less than $9 in 2011. With interest and penalties, that eventually grew to $285.

The home was seized in 2014 and auctioned off at a price of more than $24,000. Rafaeli, in his mid 80s, saw none of the surplus profits from the home’s sale.

Also included in the suit was Andre Ohanessian, who owed around $6,000 in delinquent taxes to the county. His Orchard Lake Village property was seized and then sold by the county for about $82,000.

Oakland County Treasurer Andy Meisner was working under Public Act 123 of 1999, which shortens the amount of time property owners have to pay their delinquent taxes to about two years before losing their property under a process called tax reversion.

Public Act 123 was meant to eliminate blighted and neglected properties, but critics say it creates undue hardships on homeowners with even minor debt.

The defendants’ argument that the county was not only entitled to seize the properties in question, but justified in keeping the surplus proceeds from their sale above what was owed, was noted by the justices in the decision to be “an exceedingly poor attempt at disguising a physical taking of property requiring just compensation as an arbitrary and disproportionate tax.”

“We are thankful that the court today vindicated Uri Rafaeli and Andre Ohanessian’s property rights,” attorney Christina Martin, a senior attorney at Pacific Legal Foundation, said in a prepared statement. “This decision will protect people across Michigan by prohibiting county governments from stealing from struggling property owners.”

She added that Rafaeli wasn’t left homeless from what she called “the county’s theft.” He had been renting the property out to supplement his retirement pension.

“Fortunately, now thanks to him, it cannot happen to anyone else in Michigan,” Martin said in an email. “Uri has always wanted his Southfield house back. After Oakland County sold his house to a private investor, the house was apparently returned to the county, where it fell into disrepair. So we will see what happens on remand.”

Now that Public Act 123 is likely to be overhauled, Meisner said he’s looking forward to working with the Legislature to make changes to the way the law works. After all, while at the core of the case in question, he said in a prepared statement he was just doing his job as the county treasurer.

“I swore an oath to uphold the law, and to act as a fiduciary of the county, including defending the county in court cases as they arise. Such was the case with the Rafaeli decision out of the Michigan Supreme Court today, which I was obligated to defend despite having issues with the state law in question,” he said.

He added that he’s passionate about preventing foreclosures and fighting to keep people in their homes. He said that as a state representative, he worked with the Legislature to reduce the interest charged on delinquent properties under Public Act 123 and, more recently, has aimed to create legislation that will allow county treasurers to have discretion to stop a foreclosure on a property because of a small balance — something he said is not currently in place.

Some members of the Oakland County Board of Commissioners, however, believe Meisner has more leeway than that.

“The Oakland County Board of Commissioners is gravely concerned that County Treasurer Andy Meisner violated the constitutional rights of an elderly homeowner, and other residents, as determined by the unanimous Michigan Supreme Court today,” said Board Chairman David Woodard, of Royal Oak, a Democrat, and Republican Caucus Chairman Michael Gingell, of Lake Orion, in a joint statement.

“This carelessness and ineptitude will likely cost Oakland County taxpayers more than $34 million. In light of this ruling, the Board will have to evaluate what steps need to be taken to protect taxpayers and ensure the treasurer does not make this mistake again. We are extremely disappointed in his leadership and poor decision making.”

The prepared statement added that, last year, the Board of Commissioners approved a miscellaneous resolution calling for a law change to prevent the county treasurer from foreclosing on property and keeping the “profit from an auction sale, but Meisner opposed the action.”

Sarah Moreau, the senior community liaison for the Oakland County Board of Commissioners, did not respond to a request for comment before press time as to what prompted that resolution last year.

Meisner said he didn’t take a position for or against that resolution, but he did offer input.

“I agree with the sentiment that the delinquent property tax law in Michigan has some rough edges, which is why our office administers the law with compassion and uniformity and fights for improvements in the law to make it more equitable,” he said in an email. “I also pointed out that the rating agencies who give our county our AAA bond rating appreciate us having the extra proceeds and that the legislation discussed in the resolution could have unintended consequences.”

Meisner’s spokesperson, Neil Jain, said the county has never relied on funding from forfeiture sales to balance the budget, and profits have been placed in a restricted account in the county’s general fund. For that reason, the court’s ruling shouldn’t impact the county’s coffers much.

In the coming weeks, the board said it would appoint a special committee to lead an investigation into the matter so there will be a plan to “mitigate the financial impact this will likely have on the taxpayers of the county,” as the county will be responsible for paying the plaintiffs in the case for the surplus profits made on the sale of their homes.

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