The Michigan Supreme Court has ruled that its 2020 decision regarding local governments profiting from the sale of foreclosed homes can be applied retroactively. This means that potentially hundreds of millions of dollars could be returned to individuals who lost their properties due to unpaid taxes. The court deemed the previous practice as “home equity theft.”
In a case argued by Christina Martin from the Pacific Legal Foundation, it was highlighted that counties were essentially taking surplus cash from the sales of foreclosed properties, even if it exceeded the amount of unpaid taxes. This practice was found to violate the Michigan Constitution by the Supreme Court in 2020. The ruling can now be retroactively applied to foreclosures that occurred before the decision was made four years ago.
Justice Brian Zahra, writing for the court, emphasized that the case involved a violation of the constitutional rights of numerous individuals. While acknowledging the dilemma faced by communities that followed the law allowing the practice, Zahra stated that constitutional violations cannot be justified based on statutory directives.
Attorney Phil Ellison noted that tens of thousands of former Michigan property owners may now qualify for payment as a result of this ruling. The Michigan Municipal League, representing local governments, opposed the retroactive application of the 2020 decision, citing potential fiscal chaos if forced to comply with returning surplus funds.
According to Martin, over a dozen states were engaging in similar practices of retaining excess funds from property sales before the U.S. Supreme Court unanimously ruled against it in 2023. The potential impact of this decision extends beyond Michigan, addressing a widespread issue of government overreach in property foreclosure cases.