Civil forfeiture abuses continue, the property tax edition. No crime required, and also no refund of the excess proceeds when they sell your house out from under you for a few bucks of back interest. Homeowners in MA, MI, MN, ND and OR - you have been warned.
last year the Michigan Court of Appeals held that a county government could use civil asset forfeiture—the same legal process used by police to confiscate drug lords’ mansions—to seize a modest rental property Mr. Rafaeli owned because he accidentally underpaid his property taxes by $8.41.
Mr. Rafaeli bought the house through his business for $60,000 in 2011. Later that year he inadvertently underpaid his property’s taxes by $496. When he learned of his mistake in 2013, Mr. Rafaeli attempted to pay the debt in full but failed to account for the interest that had accumulated since he received the bill. He came up $8.41 short.
Unaware of his error, Mr. Rafaeli went on to pay his taxes in a timely manner in subsequent years. Nevertheless, in February 2014 Oakland County foreclosed on the property to collect the tiny debt, along with $277 in penalties, additional interest and fees. Six months later the county sold the property at auction for $24,500 and refused to refund Mr. Rafaeli any of the profits.
Mr. Rafaeli’s story is all too common in the Wolverine State. Michigan’s General Property Tax Act requires government entities like Oakland County to take property for unpaid taxes—no matter how small the debt—and to pocket all proceeds from their sale. In most states when the sale price of a tax-distressed property exceeds the debt owed to the government, the surplus is refunded to the property’s former owners. But Michigan profits off the misfortunes of property owners like Mr. Rafaeli, as do Massachusetts, Minnesota, North Dakota and Oregon.