"Home Equity Theft" -- The New Scam Under The Cover Of Law
Imagine sinking your savings into a home and then losing it over a small unpaid amount in property taxes...taxes you had no idea you owed and would have paid, if only you had been told.

Eric Boehm writes at Reason about the state of Michigan effectively stealing homes over unpaid taxes -- sometimes less than $10 owed -- and keeping the excess revenue for their own budgets:

An Incentive for County Officials to Steal The aggressive use of home equity forfeiture under Act 123 has not only failed at its stated goal of returning abandoned homes to productive use, it has created a perverse incentive for county officials to effectively steal from their constituents.

On the morning of April 1, 2014, Linda Irwin, Cass County's treasurer, emailed a county contractor to say she was "tickled pink" to have the opportunity to seize a $3.5 million lakefront property. The deadline for the property owner to settle an unpaid property tax debt had passed the day before and the county was ready to foreclose. In subsequent emails, the contractor joked with Irwin about using the property to host cookouts for county employees, according to court documents attached to a lawsuit against Cass County.

It wasn't until three weeks later that Douglas Anderson, the registered agent who was handling the property and overseeing the construction of a still-unfinished home, became aware anything was wrong. In court documents, lawyers representing Anderson and property owner Sergei Antipov allege the county failed to provide adequate notice about the unpaid property taxes. Cass County argues that it took the appropriate steps required under law, sending two certified letters to the address. Both were returned as undeliverable, likely because there was no one actually living at the address yet.

It was not until April 18, 2014, weeks after the foreclosure deadline had passed, that county officials called Anderson to tell him the property was being seized. When Anderson and Antipov offered to pay the back taxes, the county refused to accept it.

"It's a done deal," Irwin told a local newspaper in June 2014. "They've tried to send us a check for $100,000, and I've returned it. I've had my council look at it, and we've done everything right. We didn't make any mistakes. They did."

Maybe so. But the county--and the contractor, Title Check, which works with county treasurers across the state and gets to keep a portion of the proceeds from auctioned properties--does not appear to have done much to alert Antipov that he owed taxes.

It is obvious an enormous conflict of interest -- as in "asset forfeiture" cases involving police taking cars, money, and more -- for the agencies benefiting financially to be the ones overseeing these forclosures.

The article opens with this story:

An 83-year-old retired engineer in Michigan underpaid his property taxes by $8.41. In response, Oakland County seized his property, auctioned it off to settle the debt, and pocketed nearly $24,500 in excess revenue from the sale.

Under Michigan law, it was all legal. And hardly uncommon.

...Organizations representing property owners like Rafaeli say the practice is unconstitutional, inequitable, and unreasonably harsh. They call it "home equity theft"--a process that's a close relative to the civil asset forfeiture laws that have been used by police departments to similarly deprive innocent Americans of their property without due process. They are now asking the state Supreme Court to restrict the practice.

"Michigan is currently stealing from people across the state," says Christina Martin, an attorney with the Pacific Legal Foundation, a nonprofit law firm now representing Rafaeli and other homeowners in a class-action lawsuit that will go before the Michigan Supreme Court in early November.

"Counties have been authorized to take not just what they are owed, but to take people's life savings."

Absolutely obscene.

In court documents, Rafaeli's attorneys estimate there have been more than 100,000 properties--along with the "entire equity in them"--that have been taken by Michigan counties since 2002. "In thousands of instances each year, the proceeds for a given property sold at auction far exceed the delinquent tax amount and are far less than a delinquent taxpayer's equity in the property," they argue. "This results in millions of dollars in surplus proceeds and equity for the counties and tax sale purchasers."

...In Oakland County, where Rafaeli's Southfield property was seized and sold in 2014, the process has been lucrative too. According to the county's most recent comprehensive annual financial report, its DTRF had $196.8 million in net assets.

...That's hundreds of millions of dollars in private equity that have been transferred to the two counties' control--completely legally, under the terms of Act 123.

"It is simply government-sanctioned theft," says private attorney Philip Ellison. Ellison has been involved in a series of class-action lawsuits targeting nine Michigan counties' use of home equity forfeiture over the past six years, during which time, he calculates, counties in Michigan have pocketed more than $36 million in surplus equity seized from tax delinquent properties.

I hope these lawyers win.

Oh, and a question for you: Should we have property taxes at all? Why should the government be charging you annually for what you already own or are still paying for?