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Elderly Man Loses His Home Over $8.41 In Unpaid Property Tax

Josephine 06/08/2021

An 83-year-old man is suing the government after losing his house over an outstanding debt of just $8.41 in property taxes. 

Uri Rafaeli bought his home in Southfield, 15 miles north of Detroit, with the hope that the rental income generated from the property would fund his retirement for the long run. In 2014, however, the local county treasurer foreclosed on Rafaeli’s home after he failed to pay $8.41 on his property tax bill.

After purchasing his house, Rafaeli believed he was paying his property taxes on time and in full, but in 2012 he received notice he had underpaid his 2011 tax bill by $496 (£375). The retired man paid the majority of his debt but accidentally made a mistake while working out the interest, meaning his payment was slightly off.

Unaware of his mistake, Rafaeli sent off his cheque, and while it was in the mail even more interest accrued on his property tax. He ended up being short by $8.41 (£6).

As a result, Oakland County seized the 83-year-old's property and put it up for auction before pocketing $24,215 in profits in 2014. According to real estate site Zillow, the house sold for $60,000 and is now estimated at $129,507.

The move was legal under Act 123 of 1999, as Michigan allows its County treasurers a great deal of authority when it comes to handling unpaid taxes, including rushing the tax foreclosure process, Forbes reports.

Under Act 123, a property is considered delinquent if taxes aren't paid in the previous year. If the outstanding fees remain unpaid after two years, the County can foreclose on the property – which is what happened when Rafaeli had outstanding tax from 2011 he failed to pay in 2013 due to his mistake.

Shortly after foreclosure, the owner loses the right to buy back the property and the County becomes the owner, meaning they can pocket the money from the sale. There’s no requirement to refund any of the proceeds to the former owner, even if the overage far exceeds the amount owed.

Rafaeli took a stand against this system and sued the County with the help of the Pacific Legal Foundation (PFL), saying the government unconstitutionally took his property without just compensation when it kept the proceeds from the sale.

PLF filed a brief in the Michigan Court of Appeals but it ruled against it. The law firm has now taken the case to the Michigan Supreme Court, where County officials have argued Rafaeli had ample time to pay up.

Rafaeli's lawyer, Christina Martin, is seeking a monetary award for her client.

The 83-year-old is not the only one to have suffered as a result of Michigan's system; according to PFL, thousands of property owners across Michigan have lost valuable property to pay debts, even very small ones.

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