The Michigan Supreme Court ruled today that victims of home equity theft, where the government takes more than what is owed to satisfy property tax debts, are entitled to just compensation regardless of when the illegal taking occurred.
“We are glad that the Michigan Supreme Court affirmed that government must pay just compensation when it takes more than what it is owed,” said Christina Martin, senior attorney at Pacific Legal Foundation. “Now, local governments should return their ill-gotten gains to those who had their hard-earned equity stolen.”
In 2017, Kent County foreclosed on Matt Schafer’s home after he fell behind on his property taxes. Schafer owed $5,300 on a property valued at nearly $96,000. While he was out of town for National Guard drills, the county took his property and sold it at auction for $51,500 but kept the entire amount instead of retaining only what Schafer owed.
In July 2020, the Michigan Supreme Court ruled in Rafaeli v. Oakland County that home equity theft is unconstitutional. Similarly, in May 2023, the U.S. Supreme Court ruled in Tyler v. Hennepin County against such practices.
Following the Rafaeli decision, Schafer filed a class action lawsuit against Kent County seeking the surplus sale proceeds rightfully his. The county argued that because Rafaeli did not explicitly mention retroactivity, it was not required to compensate for home equity theft committed before the decision. The trial court disagreed and ruled in Schafer's favor; this ruling was upheld by the Michigan Court of Appeals before being brought to the state supreme court.
Today’s ruling by the Michigan Supreme Court affirms the lower court’s decision: “Constitutional takings require just compensation. And retroactive application of Rafaeli merely requires returning money to landowners that was taken by counties... Rafaeli must be applied retroactively to timely filed cases not yet final at the time of the decision.”
The court further stated: “Requiring just compensation for public use of private property is a basic right lying at the heart of rule-bound government in Michigan and the United States more broadly.”
The case is Matthew Schafer et al. v. Kent County, MI.
About Pacific Legal Foundation:
Pacific Legal Foundation is a national nonprofit law firm defending Americans threatened by government overreach and abuse since its founding in 1973. PLF challenges governmental violations of individual liberty and constitutional rights across state and federal courts with active cases in 34 states plus Washington D.C., having secured 18 wins out of 20 cases litigated at the U.S. Supreme Court.
