November 06, 2017 Category: Real Estate
A few years ago, I received a call from an elderly client (let’s call him “Fred”) in a panic. Fred told me that he went out to his lake cottage one spring for the first time since winter and found a notice of foreclosure pasted on the door indicating that the property had been foreclosed upon for non-payment of taxes. The appeal period had long expired. I asked Fred if he paid his taxes. He couldn’t remember and said he thought he escrowed for taxes as part of his mortgage payment. Upon further inquiry I learned that he owned the property free and clear and that yes, he forgot to pay his property taxes. After some finagling I was able to make a deal with the County Treasurer to get Fred’s property back so long as Fred paid all of the taxes, plus interest, within 48 hours. I did this by convincing the County Treasurer that Fred was elderly, had moved within the past few years and that the County had the wrong mailing address for purposes of notice. Fred was lucky. The County Treasurer accepted my story, although he didn’t have to.
Fred’s problem is not unique. We all know governments are fallible and the tax rolls inevitably contain mistakes with respect to an owner’s address or even an owner’s name. This applies to property owners of all types regardless of the level of sophistication. Commercial properties can change owners many times in a relatively short period of time and even sophisticated owners sometimes fail to notify the taxing authority of address changes or changes in entity names.
The question of whether a property owner can lose property to tax foreclosure, even if actual notice of the pending foreclosure is never received, was recently answered (some would say confirmed) by the Michigan Court of Appeals in the case of Rafaeli, LLC et. al v Meisner unpublished decision of the Michigan Court of Appeals October 24, 2017, Docket No. 330696. In that case Rafaeli, LLC was an out of state owner of real property in Oakland County and lost its property through a tax foreclosure sale. The company claimed it never received actual notice of the pending foreclosure because all notices that were mailed were returned to the County as undeliverable. The court found that even though Rafaeli LLC did not receive actual notice, the County provided other means of notice such as publishing and posting notice at the property address and that was adequate to uphold the foreclosure.
Previously, in Sidun v Wayne Co Treasurer, 481 Mich 503 (2008), the Michigan Supreme Court stated that where notices of tax delinquencies were returned to a county treasurer as undeliverable, the county was not entitled to proceed with foreclosure without “reasonable follow up methods.” But the court in Rafaeli indicated that under the notice provisions of the Michigan General Property Tax Act (MCL 211.78i) alternative means of notice, including personal visits to the property and notice by publication satisfy the minimum constitutional requirements of notice. “It is reasonable to presume that following the notice requirements of the GPTA usually results in providing the affected taxpayer with actual notice of foreclosure proceedings.” All that is required of the foreclosing entity is to provide the minimum due process provided in the Act, which is deemed to provide notice.
Fred was lucky to get his property back. He received the minimum notice under the GPTA even though he never received actual notice. The notice was posted on his property and the County published notice in a legal newspaper, (that of course Fred would never see). Undoubtedly, there are numerous other “Freds” out there who were not so lucky. As indicated by the Court in the Rafaeli case above, their ability to find redress through the court system is severely limited.