Settlement sends foreclosure profits back to owners

Editor’s note: The above video is from a July 9 report on Michigan’s tax debt foreclosure process.

GRAND RAPIDS, Mich. (WOOD) — A judge has approved a settlement that returns most of the profits from property sales after some Michigan homeowners lost their homes due to unpaid property taxes.

Before 2020, counties would keep all the profits from a property tax foreclosure sale, sometimes keeping tens of thousands of dollars more than what they were initially owed. But the Michigan Supreme Court ruled that was unconstitutional and that the former property owner has a right to the surplus proceeds.

On Friday, United States District Judge Paul L. Maloney approved a class action-lawsuit settlement that means several people who lost their property between 2013 and 2020 will get surplus proceeds from the sales for their former homes.

The decision follows a two-year negotiation period. To get the surplus money, the former property owners needed to file a claim last year.

The class-action lawsuit represented claimants in 43 Michigan counties who will get around 80% of those surplus proceeds.

“This settlement resolves significant pending litigation in Kent County while providing an avenue for taxpayers to reclaim their surplus proceeds,” Kent County Treasurer Peter MacGregor said in a Wednesday release. “We’re thankful for the court’s decision, which helps bring this issue closer to complete resolution.”

That lawsuit was spurred by a case out of Van Buren County in which Wayside Church owed $16,750 in taxes and other costs on a piece of property. The county sold it for $206,000, close to $190,000 in surplus proceeds, after foreclosing on it in 2014. The church didn’t get any of that.

Tax foreclosure is a yearslong process. A new system enacted following the 2020 Michigan Supreme Court decision creates a way for people to get back the surplus proceeds. County treasurers say the process to get the money is as “simple as possible,” while attorneys say it’s “designed to fail.” Click here to read more.

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