Detroit— Wayne County officials plan to file a lawsuit Thursday to reclaim about 22,700 tax-foreclosed properties that were sold to new buyers who also didn’t pay taxes.
The properties collectively owe more than $80 million and represent more than 78 percent of the 29,000 properties auctioned by county treasury officials since October 2011. The vast majority are in Detroit.
Owners still have time to pay up, but the lawsuit is the latest attempt to end a cycle of abandonment and speculation aided by the treasurer’s October tax auction.
Properties sell for as little as $500 apiece, prompting investors to sit on them or milk homes for rental cash without paying taxes until they are foreclosed again.
“The treasurer realizes there were abuses going on,” said Chief Deputy David Szymanski. “People were ignoring the rules.”
Some buyers promise a fight, saying it is illegal and will stunt redevelopment. Taxpayers generally have three years to pay taxes or lose properties, but the Wayne County treasurer in 2011 added language requiring buyers of properties sold at auction to stay current on taxes.
“Why should someone who is trying to put properties back to productive use ... receive less rights than other property owners would?” said Brad Aldrich, a Plymouth attorney who represents bulk auction buyers and is researching potential challenge to the treasurer. “People are going to be less inclined to buy. They might just say, ‘I don’t want to get stuck losing the property.’ ”
The county added the rule in response to a series of Detroit News reports about buyers who shed their tax debts by buying back their own foreclosed properties at public auctions. County officials hoped cities would enforce the rule and took action when few did, Szymanski said.
Wendy Briggs of Fenton said she owes “a few hundred thousand” in taxes on about 300 properties she bought last fall through her company, Tradin’ Places, and hasn’t sold yet.
She generally sells the properties for $3,000 to $10,000 on land contracts and tells buyers the taxes are their responsibility. But said she understands the treasurer’s crackdown.
“We will absolutely comply,” Briggs said. “The treasurer has been extremely generous.”
“It is a way for the treasurer to say, ‘Look, we aren’t fooling around here.’ ”
The county plans to file one lawsuit putting owners on notice they intend to seize the properties. The treasurer plans hearings July 15-16 so buyers could argue for more time to pay bills. Payment plans would be available for buyers, who are responsible for taxes for the year they bought the properties.
If buyers don’t agree to deals, the treasurer would ask a judge to seize properties by August. Homes that revert to the county would be given to either the Wayne County or Detroit land bank, Szymanski said.
Owners still could pay their tax bill and recover the property after the land bank takes possession for a period of time but it’s not clear yet how long that is. It’s not clear what the land bank will do with the properties. There could be another auction of the properties.
Ted Phillips of the nonprofit United Community Housing Coalition said he worries the crackdown could put needy homeowners on the street.
Many buy homes from bulk buyers without ever being told the properties owe back taxes, he said. He worries the crackdown could hurt needy homeowners the most.
“It’s huge concern,” Phillips said.
Ali Chami, an auction buyer from Dearborn, said the county should be focused on aiding developers rather than punishing investors. He owes taxes on a few properties he is in the process of selling. When sold, the taxes will be paid, he said.
“It seems like a huge undertaking that’s probably going to be met with stiff resistance,” Chami wrote in an email to The News. “The county knows what needs to be done but their goals are short term capturing as much tax revenue as possible.”