Oakland, Wayne sued over tax foreclosures
Thousands of properties in Oakland and Wayne counties have been taken improperly in tax delinquency foreclosures, reaping millions of dollars for government coffers at the expense of cash-strapped property owners, according to class-action lawsuits filed this month in both counties.
The complaints allege treasurers in both counties have seized properties without providing the former owners with due process, equal protection and just compensation.
In some instances, owners claim they were never notified before their property was auctioned, often for tens of thousands of dollars below market value.
The treasurers in both counties, however, insist taxpayers are contacted multiple times over tax delinquencies, given an opportunity to be heard and offered payment plans.
Andre Ohanessian says he was informed by a neighbor that a 2.7-acre lot he owned in Orchard Lake Village had been sold at auction last year to cover $6,000 in alleged tax delinquencies from 2011 to 2013. In an interview, he said he was never notified his taxes were overdue.
The property, off a private road and nature trail in a wooded neighborhood of $1 million homes, netted $82,000. It’s listed for sale at $349,000.
“I learned of the auction sale by a phone call from an Orchard Lake neighbor,” said Ohanessian, 67, a jewelry wholesaler who now lives in Sunland, California. “He called, ‘Did you know they auctioned off your property?’ I was shocked. I had notified the treasurer’s office that I had moved from Michigan.”
The complaints say Oakland County Treasurer Andy Meisner and Wayne County Treasurer Raymond Wojtowicz don’t give delinquent taxpayers the chance to argue why their properties should not be taken. Instead, both have conducted informal, nonjudicial “show cause hearings,” the suits allege.
Spokesmen from both offices said their policy is not to comment on pending litigation.
Meisner said his office instituted monthly payment plans that are worked out “face-to-face” with property owners. From September 2014 to March 2015, county treasurer officials met with 3,800 individuals to set up payment plans, prevent foreclosures and recoup money “taxpayers could have otherwise been responsible for,” according to Meisner’s office.
Since December 2012, Meisner’s office said, 6,571 payment plans have recovered $61 million in delinquent property taxes.
Wayne County Deputy Treasurer David Szymanski said 22,000 payment plans have been put in place this year to help delinquent taxpayers keep their property, but another 30,000 properties are expected to be foreclosed at auction.
Attorney Aaron D. Cox, co-counsel for the plaintiffs in both complaints, said the payment plan hearings are no substitute for a show cause hearing. “The way it is now is the treasurer acts as judge, jury and executioner,” he said.
Oakland County has received $22.5 million in net proceeds from foreclosure auctions since 2006. The money is used for maintenance of unsold properties and demolitions, and treasurer’s office staff relating to the tax foreclosure process and the county’s property tax management.
Szymanski said he was unable to determine how much money has been obtained through foreclosures but any such money would go into Wayne County’s general fund.
Both of the complaints were filed after a U.S. District judge dismissed a similar federal suit and ruled the matters should be decided in state court. The suits seek to block further foreclosure auctions this year.
Notice of hearings required
Under state law, tax foreclosures and public auctions occur after notices are sent to delinquent property owners.
One year after a delinquency is unpaid, properties are forfeited to county treasurers. The county is required to do title searches to identify those with interest in a forfeited property, because they are entitled under state law to notice of two hearings: a “show cause hearing” and a “foreclosure hearing.”
According to the suit, the “show cause” hearings should be conducted by a judge “or other neutral third-party arbitrator” to give delinquent taxpayers the chance to demonstrate a foreclosure judgment is not appropriate.
Once foreclosure occurs, the state and then the county have successive rights of first refusal to meet a minimum bid. If they pass, then the properties go to auction.
According to the Wayne County complaint, filed on behalf of Troy-based Great Lakes Affordable Homes, the foreclosure process has become a week-long event at Cobo Center where delinquent owners get “nothing but an opportunity from the county to demand taxpayers enter into unworkable repayment programs.”
Wayne County has had more tax delinquencies and foreclosures than anywhere else in the state. From 2009 through 2013, 508,936 properties were forfeited because of unpaid taxes. Syzmanski said 2014 numbers were unavailable, but more than 200,000 properties are delinquent.
“We have significantly more than any other county due to the fact we have more parcels than any other county and have experienced the economic fallout more harshly than other counties,” he said.
Thousands in delinquency
In Oakland County, an average of about 50,000 owners fall into tax delinquency annually, according to Meisner’s office. The county has 27,754 parcels in delinquency, according to treasury records.
The Oakland County complaint, filed on behalf of two property owners, says Meisner forecloses on about 11,000 delinquent land owners each year. About 700 properties are to be auctioned Aug. 17-19 at the Ultimate Soccer Arenas in Pontiac.
The Oakland complaint argues owners lose all equity on their foreclosed property, which often is sold at auction at a “handsome profit” for the county and to new owners, who “flip” it.
The suit says that’s what happened to Ohanessian. According to the complaint, Meisner took the lot in 2014 over the $6,000 in unpaid taxes and Ohanessian was never given the chance to become current on his tax payments.
“I had always paid my taxes and have the receipts. I was sometimes late, but I always paid them,” he said. “I guess I overlooked they were due but wasn’t contacted of being delinquent or in danger of being foreclosed on.”
Ohanessian said he has since learned some notices may have been sent to a former residence in Livonia.
Cox argues that was not proper notice and says the county should compensate Ohanessian. “He may never have built on the property, but its equity increased in value every year,” he said.
$60K loss tied to $8.41 bill
Another party to the Oakland complaint, a St. Clair Shores business, alleges it lost a $60,000 property in Southfield last year over $8.41 in delinquent taxes.
According to the suit, Rafaeli LLC bought the property at 20159 Mada in August 2011.
In January 2012, Meisner’s office certified a deed that all taxes had been paid on the Southfield address for five years before the sale, the suit says. A notice mailed to Rafeli that June reported a delinquency for 2011 taxes.
The complaint says the notice was mailed to the Mada Street address, not Rafaeli’s registered address, and claimed a delinquency of $496.52 plus interest and fees.
On Aug. 30, 2012, $1,691 was paid for real property taxes on the Mada address. Despite this, the suit alleges, on Sept. 3, 2012, a second notice of the $496.52 delinquency was mailed to the Mada address. In January 2013, Rafaeli paid the treasurer $576.07, including interest and fees.
But on Feb. 1, 2013, a third notice of delinquency was mailed to the Mada address, claiming $8.41 in delinquent taxes and $2.26 in interest, fees and penalties.
On May 16, 2013, Meisner filed a petition of foreclosure in Oakland Circuit Court seeking to take upwards of 11,000 properties for alleged tax delinquencies from 2011 or earlier, according to the complaint. Among them was the Mada property, which Meisner sought for the $8.41 in tax, plus $198.14 in interest and fees. A hearing was scheduled for Feb. 26, 2014.
Rafaeli said he was unaware of the hearing in Oakland Circuit Court on Meisner’s mass petition. Afterward, Meisner took the Mada property for $8.41 in tax and $277.40 in interest and fees.
On Aug. 19, 2014, Meisner accepted $24,500, the highest bid, from a third party at auction for the Mada property. The buyer got no deed but evicted Rafaeli’s tenants and began trying to resell the property, according to the complaint.