This recent opinion conforms federal law to a recent Michigan opinion.
On May 25, 2023, the United States Supreme Court issued Tyler v Hennepin County, Minn. In this case, a property owner owed $15,000 in back taxes. The County foreclosed and sold the property for $40,000. The Supreme Court held that it was an unconstitutional taking for the County to retain more than was needed to pay the back taxes and the fees associated with the foreclosure process. The Constitution is violated if a tax foreclosure process “provides no opportunity for the taxpayer to recover the excess value” beyond what it owed.
This opinion applies the same logic the Michigan Supreme Court used in 2020 in a case called Rafaeli, LLC v Oakland County.
Note that the US Supreme Court did not require the foreclosing government agency to automatically reimburse the excess. A prior decision deemed a statutory process whereby a property owner could seek to recover the excess. Michigan’s legislature has adopted such a process. Therefore, a property owner suffering a foreclosure needs to monitor the situation and follow the statutory process to recover any excess proceeds.
This is an important ruling that protects property owners who are struggling financially.