Man Underpaid Property Tax by $8.41 County Seized Home, Sold It-Kept Profits
reason.com
reason.com
Civil asset forfeiture and this kind of laws just make racketeers out of government officials.
And yeah - $8 isn't a good reason for seizing someone's house, when they can easily get a small claims court to summarily get that $8.
Thanks to OP who spotted this.
The owner in the article had unpaid property taxes for over 3 years and apparently underpaid the amount due right before a deed sale because he miscalculated interest. It's hard to know exactly what happened from reading the article alone. A court judgement would state the facts of the case more clearly. If the miscalculation was the fault of the county, it seems like they were in error and the deed should be invalidated. If the county gave him a quote and he intentionally underpaid (for whatever reason he justified it with), I wouldn't expect him to have recourse under the law.
States are broadly divided into tax deed and tax lien states. Michigan is a tax deed state and I am not familiar with the particulars of their law. I live in a tax lien state (Colorado). When you don't pay your property taxes, a lien is sold at auction. If you don't pay after 3 years, the lien holder can apply for a tax deed. This process takes 6 months. The owner is attempted to be served and notices are published in the local newspaper. You need to contact the county for the payoff amount, but the interest in general on the lien accrues monthly computed on simple interest (non compounding). The rate this year is 12%, so 1% per month.
There needs to be a consequence for not paying your property taxes or few would pay them.
A property with a tax lien does not go to auction. The property tax lien holder is more senior to all other liens, except a federal tax lien. This includes being senior to mortgages, which is why mortgage companies typically keep your property taxes in escrow (to ensure they are paid).
Once a tax deed is issued, no compensation is paid to the previous owner. The title is not marketable for a period of 7 years. That is, a title company will not issue a warranted deed on a tax deed transfer. To resolve this, the deed holder needs to wait or bring a quiet title suit. The previous owner may get compensated in a quiet title action to sign a quit claim deed or similar to rectify the quiet title suit.
Truth is - property and property rights are largely a convention that we agree upon, that convention is how state/government is created.
Remember that there is only one sovereign in every single country on this planet - king, despot, president, parliament or the people. Individual sovereignty is practically non-existent.
You don't own the land or your body. We just agreed to protect each other's freedoms and grant certain protected rights.
It is entirely reasonable to have tax collection agencies send a good faith estimate with a window of time for corrections if you have data they do not have. There are enough threads about the evil that is Intuit that their efforts to block the IRS from offering free tax prep need not be rehashed here.
[1] https://taxfoundation.org/90-percent-taxpayers-projected-tcj... (Nearly 90 Percent of Taxpayers Are Projected to Take the TCJA’s Expanded Standard Deduction)
We could require all transactions that could theoretically be deductions be sent to the IRS, sure. "Trivially" is not the right word to describe it though. Think about charitable donations to tiny operations that have no IT department trying to figure out SFTP drops to the IRS.
I have to correct my cost basis for RSUs almost every year from my eTrade paperwork. Could they do it correctly in the first place? Sure.
Could it all be magically calculated for me someday, sure, anything's possible. But seeing how financial companies work from the inside, I chalk it up to incompetence more than Intuit's malice.
So just make the people who will itemize fill out a form and go through that whole process. Everyone else can just pay the bill and not worry about it.
The IRS has proposed this many times, and have been blocked by Congress just as many times.
But no - they don't know in advance who will have additional deductions so why bother with any of it for the 90% that don't? People are already going to, and often paying for, private services that they implicitly trust to tell them what they owe. Why can't the literal authority on the matter tell you first?
The IRS knew your return was inaccurate when you submitted it. And it sounds like it was off by enough to trigger statutory penalties, which was appropriate based on the facts provided.
Yes, it sucks that your employer gave you the wrong statement, but there's nothing the IRS can do about it. Your employer had a legal obligation to give you the corrected statement when they filed a correction with the IRS, and if they did not your recourse is to go after your employer to make you whole for the penalties and interest owed. The IRS is not in the business of determining who is telling the truth about not receiving legally required documents.
Why can't the literal authority on the matter tell you first?
Because Intuit and HRBlock spend a lot of money preventing the IRS from implementing that sort of system. The IRS has proposed an EZ-file system like they have in Australia or in the EU many times, and has been shot down every time.
And didn't tell me for 2 years. I'm fine to pay what I owed. Not really cool with 2 years of interest and punitive feeds.
Believe me my HR rep got an earful, but unless I want to put up money to sue, that's all that will be happening. A lawyer didn't think I stood enough of a chance or would gain enough per hour to take the case on contingency.
But then I've heard "it's your fault we programmed the computer that way" from more than one government entity.
Do you directly spend more than 10% of your gross income on medical expenses? No? Then you can't deduct them.
In addition, most medical expense reporting is already reported to IRS. They literally get your whole pay stub information - gross pay, withholdings, 401k, medical deductions, pre-tax expenses, etc...
PS: I ran a company in one of the "high regulation" EU countries and the amount of tax prep I do today in USA jumped from 30 min per year for myself and 3 employees to 30h per year myself! Oh... I didn't have to pay anything to file my tax documentation online and I got my estimated tax docs pre-filled by the tax authorities.
EDIT: @dredmorbius Thank you for the assist!
Screenshot of the interface:
Or is it only a dark pattern if the design intended to be deceptive by it creator?
The toll booth didn't read my EZ-Pass on MY car registered to ME an EZ-Pass customer. So EZ-Pass sent me a bill in the mail for $2.50 + $50 administration fee.
I went on their website to pay, and they gave me an option to add the license plate to my account and only pay the $2.50.
I did that.
Last week, after never hearing from EZ Pass again, I get a letter in the mail from a collections agency for the $50.
If I had run that booth, then I'd still be on the GSP right now.
I never went back.
Pure and simple.
Rational countries disallow these kinds of activities, and give you all the information about you that they have collected. But Intuit would lose a lot of $79 customers.
Disclaimer: Landlord, business owner, automate all the things, all that jazz.
On the flip side: a friend buys up many tax lien properties, usually for very little money.
I'm going to go ahead and say he was wrong.
There is no doubt he was wrong but the fact is he built a tank. Can't help but respect his achievement.
A concrete plant was being constructed on vacant land adjacent to his shop. He originally agreed to sell his land, but then backed out. He was angry the concrete plant cut off his shortcut access through their vacant land (he had no easement). So he decided to try to murder anyone who he viewed as standing in his way. It is very lucky that he got stuck before he could fully execute his plan.
"Investigators later found Heemeyer's handwritten list of targets. According to the police, it included the buildings he destroyed, the local Catholic church (which he did not damage), and the names of various people who had sided against him in past disputes."
https://en.wikipedia.org/wiki/Marvin_Heemeyer
"He drove the machine out of his shop through the wall, then plowed through the concrete plant, the Town Hall, a newspaper office, a former judge’s widow’s home, a hardware store, and other homes. Authorities realized that every business or home that had been bulldozed had some connection to Heemeyer and his plight against the zoning committee."
It's akin to something like the Oklahoma City bombing if the terrorists had blown themselves up in the process. But people think it was "cool" that he built his own tank and ignore the rest.
Unfortunately, making the spirit of the law overrule the wording is subject to even more casual manipulation and corruption.
Judges exist because strictly parsing the words of a law is not always enough, and knowing whether the application of the law is in line with why it was coined would be a good step.
No one wins in these institution vs. institution battles. The government does not have the agility to act as an intermediary between a public that wants land utilized and property owners who may be a single citizen or a multinational conglomerate. In my opinion, the more I hear about squatters rights, the more it sounds like the only appropriate solution.
It's when they try to seize your house over nonsense like minor rule infraction that they become awful.
An eviction from a property where the HOA is not the owner (typical detached SFH) is not something I have seen. It also wouldn't make a lot of sense because 1 month of rent in my neighborhood would cover years of HOA dues. A shared condo environment is different because what is owned by the owner and the community is more intermingled.
People don't always buy a home with an HOA because they want "facilities"; sometimes they buy a home with an HOA because they have little to no choice.
Furthermore your claim that there are no alternatives in some general areas is simply false. I defy you to identify a single residential area in the US where there are no non-HOA properties within 50 miles. Sure you might have to pay more or drive further but there are always alternatives.
https://bostonfairhousing.org/timeline/1920s1948-Restrictive...
The principle of BATNA can define the more privileged party in a contract:
https://www.pon.harvard.edu/daily/batna/translate-your-batna...
The principle remains.
https://www.nolo.com/legal-encyclopedia/unenforceable-contra...
You're also simply raising objections to elements I've introduced which you claim prior knowledge of (a fact of which, if I do have privileged access, I'd be well advised to conceal, and more probably, I don't). Which begins to seem tendentious and argument for the sake of arguing.
You could have introduced BATNA to the discussion. You didn't. I did. It is a valid concern and consideration: the HOA need only find another mark^Wbuyer. The buyer needs to find a property not covered by onerous HOA terms.
It's also notable that the Oakland County case doesn't concern HOAs. Though complaints against HOA are certainly justified in many cases.
I think a lot of the regulations they tend to want to impose are crap and busy body meddling but gathering funds to maintain community facilities is one of the legitimate reasons for an HOA.
I have seen far too many petits Napoleons terrorizing their neighbors under an HOA aegis to defend even the HOAs that act honorably to fulfill their original intents. They should all be voided. If you can't "preserve neighborhood character" on voluntary contributions and conduct alone, your HOA doesn't deserve to exist.
HOAs are all about making little insular villages with none of the actual infrastructure necessary to support one, such as schools and parks and fire trucks and businesses that generate noise and traffic (and money). That is itself cutting corners to make everything as cheap as possible, and leaving the buyers holding the bag. Do you want to be part of the city that actually provides those things, or do you want to be continually subject to nasty letters for having a dandelion in your yard, just because the home building company stuck that clause in there as a marketing gimmick for the bermudagrass-monoculture lawn snobs?
I rent in a nice neighborhood, and the HOA really dislikes rentals. But they don't have enough support to get the bylaws changed to make it more difficult to rent. So instead they abuse the fine system by selectively enforcing mostly-ignored bylaws to create arbitrary violations for rented units and implicitly discourage owners from renting.
The owner of my house never passed through any of the fines to me[1], and was very apologetic. But the notices finally irritated me to the point of putting up outside cameras. I gave my landlord video evidence of the HOA people logging violations outside, and walking right past the exact same violations[2] at several neighbors houses without even stopping. The violation letters stopped shortly after, and my landlord cut my rent by a sizable chunk as a thank you for helping him get that thorn out of his side.
[1] Based on him giving me a break on the rent going forward, and my original rent being par for the neighborhood, I assume the market rate was already being padded significantly by everyone to account for the constant fines.
[2] These are violations like the bushes hiding the HVAC unit from street view not being full enough (in the dead of winter when the leaves were thinned out), an older mailbox looking like an older mailbox despite it being consistent with the rest of the houses on the street, the trashcan still being on the street at 4PM on trash day despite everyone else not being home yet to pull theirs up yet either, the yard not being cut that week despite it having been raining too heavily for anyone to have cut their yard recently, etc.
It's likely that anyone can place a lien on your house by just filing the appropriate paperwork.
And even better, they may decide to sell the home for substantially under market price.
Even better, it won't go on the public market, because ever-so-conveniently, one of the HOA board members who voted to accept the under market lowball offers is... the board member who _made_ the lowball offer, to add to his property portfolio.
Those communities always looked to me as some sort of protestant prison. Where everybody can watch everybody to make sure nobody is committing some sin. Where all the nosey bodies can keep close tabs on you and probably report any deviation for the pastor on Sundays.
For me I want walls, I want to be able to walk naked in my garden if I want, to never ever have to close my curtains just because the jones from the other side of the street can look inside my house.
You'd think that especially other slumlords appreciate when a derelict property is seized and disposed of quickly because the traphouse next door really causes a headache. It's the county that implemented the process, someone must have voted for the fast-track process!
At least threaten the guy with fines if he does not fix things up.
Most municipalities in Canada are required to accept payment up to, and including the moment the auction begins. If the payment comes in, the property is off the block (in most auctions, the list of properties being auctioned end up being a fraction of the list that was printed the morning of).
Slumlord or not, the municipalities are clearly being malicious in their handling of the appropriations.
It's not unusual in my experience to see tax sales go for below fair market value.
(A brief DDG search shows no relevant results.)
And as noted by others: the fact alone would not justify confiscation of property or denial of due process. This despite my many misgivings of Reason as a generally credible narrator.
He doesn't seem like a slumlord, he says he "completely renovated" the property. (https://www.michigancapitolconfidential.com/oakland-county-t...) And there are 3 other owners mentioned, all of those were working on their properties too.
I once had the misfortune to rent from a landlord like this. They stopped paying for garbage removal, a few days later the heating broke. That was in a state where code enforcement actually had teeth, in a more tenant-hostile state I'd had had no recourse except moving out at shortest notice. Thankfully the roof held tight all the time I was there, there would have been no money for that kind of repairs.
That landowner actually did "renovate" the property somewhat, they did tart up the kitchen a bit but did nothing about the sewage leak in the downstairs bathroom.
No one should have patience for bankruptcy artists who go crying about "violence inherent to the system" when they can't make it, if they overextend themselves they need to go through the bankruptcy process. That's why you have interest as a risk premium. Too bad the fellow missed out in the gentrification windfall.
You damn bootlickers just need to stop deepthroating the damn boot.
The fellow made a deliberate choice to hand the property back to the county, and he was probably glad to do so and get out of the rental business.
I suspect this part
"But he made a mistake in calculating the interest owed, resulting in another underpayment of $8.41.
A little more than a year later, in February 2014, Rafaeli's rental property was one of 11,000 properties put up for auction by Oakland County. It was sold for $24,500 in August of the same year—far less than what Rafaeli had paid for the property just three years earlier."
is glossing over a lot of pertinent details.
Another way to state one of the facts in this case is that the state seized the property of an owner who was delinquent on his tax bill for over 5 years and well aware of it. Once it's the state's property I don't see why they should pay the "profits" back to him or any other prior owner. At that point, the state and the collective taxpayers are already the owners and the money enters the collective fund.
By giving away the profit to a previous owner, the argument presented is effectively that the State should be a taxpayer-funded seller's agent that works exclusively in the property owner's favor rather than working in favor of the taxpayers who actually pay their fair share.
edit: Excuse me! OED recognizes "inciteful" as a word. Sorry. https://www.grammarphobia.com/blog/2010/12/inciteful.html
I think what people are objecting to here is confiscating the house over a tiny tax liability, selling the house for 1000x the tax liability, and pocketing the difference. For example, having a tax liability of $8, confiscating the house and selling it for $24000, then pocketing $23992 over the $8 tax liability.
There's already a perfectly adequate way to address late property tax payments, charging interest. Either they pay and the city gets their money back (with interest), or they don't and the balance is eventually big enough to justify selling the property (so they get their money back with interest). It may be more lucrative for the city to confiscate the house immediately and make a 300000% profit on an $8 balance but it's hard to see how that's reasonable (and it seems like it will have to meet the "reasonable" threshold in order to be constitutional).
The process where the department is obligated to return the positive delta to the previous owner after an auction is a self-bankrupting process. It starves the department of funds and leads to higher taxes to fund it while people are willing. It's classic libertarian starve-the-beast mentality to destroying public isntitutions. The department would have no incentive to sell for above market+interest prices and would burn through its budget on those properties not mentioned by Reason that are sold at a loss.
I really don't see the problem with waiting. Either it's paid off with interest and the state is made whole, or they don't pay and they sell the house once it becomes a reasonable amount (and the balance is paid off with interest). Either way the state gets its money (plus interest).
I'm not against raising revenue, but I don't think all ways of raising revenue are automatically good. For example you could also raise revenue by taking someones car if they don't have a current sticker on or get a parking ticket. Taking homes like this confiscates an almost random amount from people with no consideration of their means or the amount other people are paying. You could be confiscating most of the savings of a middle class couple near retirement for example, and by doing so make them contribute 100x what their wealthy neighbor does to government revenues.
If there is no problem with collecting in a way where everyone pays the same and the state is reimbursed for any additional costs, they should do that. If they need more revenue, they should raise property tax, not play games where a few people pay 1000x more because a mail didn't reach them (and if you read the article, it seems like some counties were deliberately doing the absolute minimum notifying people so they could hit the jackpot).
Any takers?
(Also, the "profit" part is a red herring. There's no way the county could have done all of this for less than the proceeds of the sale.)
Per the article, this is only possible in Michigan, and only because of a specific, misguided law passed in 1999.
It's a solved problem.
> In each case, the property owners alleged that they were not given sufficient warning about their delinquent taxes. In some cases, that's because county officials were mailing notices to unfinished homes or properties without permanent residents. In others, like Rafaeli's case, the notices were delivered to tenants who failed to pass along the information to their landlord, mistakenly believing that the county would inform the landlord separately.
They were warned. If you ignore the warnings, what else is the county supposed to do? If there's no punishment for not paying taxes, nobody would pay taxes. Seizing assets is better then putting someone in jail, because it actually makes taxpayers money and it hurts the people not paying in a fair way.
If you don't live at a house enough to check the mail and you aren't paying property taxes on it, then it's actually good for society to give that house to someone who needs it and will pay taxes on it. This type of thing can reduce homelessness.
Finally landlords have no excuse for this, they're making money off these properties, it's similar to not using them. If you're gonna be making a profit off of collecting rent I think the least to ask is for you to properly pay your taxes.
That's atrocious. They seize the property and keep the entire proceeds of the auction. That's outlandish. It goes on to say in the article that the properties often go on to speculators who rent them or leave them empty.
But I don't think the whole law is bad because of a couple of mistakes. There should probably be a system to stop seizures from happening over honest mistakes, but the law itself seems like a good idea. We don't get rid of murder laws because sometimes we convict the wrong people, for example.
Sure, if someone has an asset that they aren't paying taxes on you can put a lien against it or maybe even take it in forfeiture. You absolutely can't keep the entirety of the proceeds from a sale above what's owed and maybe the funds for running an auction.
In the end I think they have a fair legal case for recourse. There's no criminal violation and a civil violation isn't enough for complete asset forfeiture.
That's the case with asset forfeiture(there have been many cases where police have literally used that legal tool to have a better salary), fines on poor people(reason literally covered a case about it today) and other methods.
I say this from experience - American police are all shitbags working to enforce the law, not to "Serve and Protect". That Serve and Protect dissipates really fast, when you're mugged... and materializes really fast when a citation is possible.
This solves the problem without creating (too large of) a perverse incentive for the county government.
This is a very aggressive law, but there are reasons that the law is written this way. Drawn-out processes to seize property tend to lead to higher levels of vacancy and destruction of the property.
Local governments often don't know who the beneficial owner of a property is, especially with low-end rentals. I used to consult to a local utility. Probably 30% of the properties were owned by LLCs where the owner was unknown. At least a half dozen had bills sent to people known to be dead. In this case you're looking at a landlord in his 80s who doesn't get mail regarding his rental property sent to his home. It sucks, but once there's a lien on the property you're SOL as a property owner.
> It sucks, but once there's a lien on the property you're SOL as a property owner.
That implies that any home with a mortgage means you're SOL. Does this mean ownership is dead? The US has a mix of title-theory and lien-theory states. In lien-theory states, a mortgage counts as a lien on the home. Michigan, in particular, is an intermediary state, in which case the mortgage does have some component of a lien. It gets complicated since each state has it's own rules.
I understand why they might want to have a different process for vacant/unmaintained properties, but in the article it looks like this is happening to occupied properties in good condition (or even actively under construction)!
I also don't understand why it's appropriate to keep the whole house value after auction, even when it's 100x (or in some examples in the article 1000x) the taxes owed and the owner is known.
There's other stuff in the article where it seems like the local governments deliberately want to avoid the owner discovering their tax liability. For example they make the current year's tax bill not mention any existing tax debt (which may be from a different owner). In one example the county treasurer calls the owner of a new home under construction only *after" the deadline, just to tell them that they've been waiting out the clock on the tax debt of a previous owner, and they plan to seize the house and refuse any payment on the balance!
I don't see the public interest in this aside from trying to turn communication issues into huge financial windfalls for local governments (due to asset confiscation), with the perverse incentive that the party responsible for notifying people gets the windfall if that process fails.
The former owner would most probably get ripped off, a lot.
But what you quoted:
> "In some cases, that's because county officials were mailing notices to unfinished homes or properties without permanent residents. In others, like Rafaeli's case, the notices were delivered to tenants who failed to pass along the information to their landlord, mistakenly believing that the county would inform the landlord separately."
It appears there are many cases where nothing was ignored. Notification wasn't received.
And that's without considering the perverse incentive where it's in the county's best interest to "accidentally" send notices to the wrong address.
This all depends on how much of a warning you get and such. Obviously if you only get a month's warning or something that would be bad, but if you're warned a year or two in advance I see no problem with this.
Set up a system were you can go to court to challenge it. In cases where notices were sent to the wrong address or you simply forgot interest you should be able to overturn this, sure.
That's not how property ownership works in America.
(However, in Michigan, the term required to acquire title by adverse possession is 15 years.)
Come on, the owner knows that there is a property tax bill every year, and if they don't receive it on time they should get worried. Everyone knows when their credit card bill should show up and promptly pays even when the post office lost it.
> in the county's best interest to "accidentally" send notices to the wrong address.
Yeah, that's a nice way to end up in federal prison and the county to be on the hook to pay everyone back.
PS - According to the article, the house was seized in 2014 for a delinquency on the 2011 taxes. It wasn't something that happened after a single missed notice.
The government shouldn't be in the business of maximizing profit at the expense of the well being of the people.
There is not one correct thing in your entire post.
We have no proof that said notice was actually received. When you take legal action even as a private citizen the onus is on YOU to ensure communication is received not on them to ensure they received it. If you are going to take a property worth 10s of thousands you can spend a few dollars paying someone to serve a notice.
You may correctly discern that nobody that had actually been thus notified would fail to pay the $8 and thus such service would certainly result in a financial loss. Tack the cost of said service onto the bill or just take the $8 onto the next years bill.
You incorrectly claim that their is either anarchy where nobody pays their taxes or a punitive dystopia where 83 year olds lose their properties over Less than the cost of a value meal at McDonald's and exclude the entire middle ground where virtually all sane governments reside.
A dullard could design a functional middle ground and if you look at the array of imbeciles that work in local government they in fact largely have all over America. A few thoughts from yours truly.
- Require onerous process prior to actually taking a house to ensure that all takings are a result of actual decisions not to pay rather than mischance. Example paying people to actually serve notice to the person and prove receipt or that such service is impossible in extreme cases where someone is missing or impossible to contact. You can reasonably charge someone for this service.
- A fine for nonpayment
- Minimum principal due before you can take a property to ensure that no matter of 8 dollars results in a house being taken. This ensures that you can't simply keep piling on fines until it reaches the minimum.
- A lien on the value of the house for the money due when the property is sold or transferred so that the government gets paid its due.
- A policy of forgiving small discrepancies or miscalculations say under 10 bucks to ensure more money isn't spent on collection than is worthwhile.
The government could affect a net decrease in homelessness by literally taking away properties from wealthy people who own multiples and giving them to the poor. In fact any action that takes away from some and gives to the other makes someone better off. That being the general case doesn't make the specific case of this old fellow losing his house to a predatory system better or said system reasonable.
I either picture a very serious fbi man hauling off the thing while a Norman Rockwellesque families breakfast toast is still sticking out of it or Michael Keaton as Beatlejuice saying we've come for your toaster chuck instead of daughter.
I'll bet you make weekly non-trivial transactions in every financial account you don't want seized - "well, you obviously weren't actively using these funds, so they've been collected and the county will make better use of them."
It's legalized piracy is what it is.