Kent County Tax Foreclosure Settlement Approved by Federal Court

Grand Rapids, MI (July 17, 2024) - The U.S. District Court of the Western District of Michigan approved a settlement on July 12, 2024, that will return surplus proceeds to individuals who lost their property in Kent County due to unpaid property taxes between 2013 and 2020.

The decision approving the settlement, issued by Judge Paul L. Maloney, arises from Wayside Church v. Van Buren County, a 2014 federal lawsuit where three property owners failed to pay property taxes and lost their property to tax foreclosure. All properties were sold at a county auction for more than the taxes owed. The property owners sued for the excess amount, saying the county was "required to pay just compensation under the Fifth Amendment."

At the time, though, Michigan law did not provide for returning these excess funds. County treasurers followed state statute, which permitted counties to keep any surplus proceeds. Treasurers often used these funds to offset losses on other properties that either failed to sell or sold for less than the unpaid taxes. However, most properties sold at foreclosure auctions do not result in surplus funds and usually do not even cover the costs of unpaid property taxes, leaving counties responsible for the difference each year.

In late 2020, the Michigan Supreme Court ruled this statute was unconstitutional in Rafaeli, LLC v Oakland County, leaving counties facing potential liabilities that ranged from $500,000 to more than $120 million.

The settlement was the result of lengthy negotiations that were overseen by the Mediation Office of the U.S. Court of Appeals for the Sixth Circuit.

"The assistance of the Sixth Circuit Medication Office was essential to reaching this settlement," said Kent County Corporate Counsel Linda Howell. "We're very pleased to have reached this resolution."

To obtain the benefit of the settlement, former property owners had to file claims during the spring and summer of 2023. Judge Maloney noted the settlement had a claims rate that "is quite high, and the relief provided for the class is substantial."

"This settlement resolves significant pending litigation in Kent County while providing an avenue for taxpayers to reclaim their surplus proceeds," said Kent County Treasurer Peter MacGregor. "We're thankful for the court's decision, which helps bring this issue closer to complete resolution."

Visit the Kent County Treasurer's website to learn more about the delinquent property tax timeline and process.

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