Unanimous Michigan Supreme Court Rules Government Equity Theft Harm is Retroactive

MIDLAND, Mich. — The Michigan Supreme Court has unanimously ruled that its 2020 decision in Rafaeli v. Oakland County, which limits government seizure of home equity during tax foreclosures, will be applied retroactively. Homeowners who had their properties foreclosed before the Rafaeli decision will now have the opportunity to seek legal redress if the government retained excess equity from their homes.

This ruling marks a significant victory for property owners seeking justice and restitution. Historically, state and local governments would foreclose on properties due to unpaid or underpaid property taxes—often without the knowledge of homeowners. After foreclosing, the government would sell properties for substantial profits, retaining the equity beyond the amount owed in back taxes and fees. In Rafaeli, Michigan’s high court established that the government is only entitled to recoup the amount owed in taxes and fees. Any remaining equity must be returned to the former property owner.

“The court's ruling today confirms that Rafaeli will have a retroactive impact, allowing individuals to potentially file lawsuits if the government kept their home equity prior to the 2020 decision,” said Derk Wilcox, senior attorney with the Mackinac Center Legal Foundation.

The Mackinac Center Legal Foundation, along with Pacific Legal Foundation and the National Taxpayers Union Legal Foundation, submitted amicus briefs advocating for the retroactive application of the Rafaeli ruling. 

Learn more about Rafaeli v. Oakland County here.