Michigan High Court Asked to Review Detroit Foreclosures

DETROIT (CN) – Detroit homeowners asked the Michigan Supreme Court to grant their appeal of rulings that a tax tribunal rather than trial court should hear claims of discriminatory and inflated property taxes they say caused tens of thousands of people to lose their homes.

In July 2016, seven black Detroit homeowners and a coalition of neighborhood associations brought a class-action lawsuit against the city and Wayne County, claiming evictions arising from unpaid property taxes overwhelmingly affect African-Americans, in violation of the Fair Housing Act, or FHA.

Wayne County foreclosed homes for unpaid taxes even though Detroit had failed to comply with a duty to assess property taxes every year during Great Recession and in the years after, according to the American Civil Liberties Union of Michigan, which is representing the homeowners.

According to the Tax Foundation, the median annual property tax for Wayne County from 2007 to 2009 was $2,304.

The tax foreclosure crisis was the worst in the state since the Great Depression, the ACLU says. It claims the city overvalued properties and failed to accurately assess property taxes based on the fair market value of the homes. Homeowners should never have paid the taxes in the first place, the group contends.

Wayne County Circuit Court Chief Judge Robert Colombo ruled that the case belonged in the Michigan Tax Tribunal, rather than in his court, despite finding that the plaintiffs had stated a claim for race discrimination under fair-housing laws.

The homeowners challenged Colombo’s ruling in the Michigan Court of Appeals, but that court affirmed the judge’s decision in September in an unpublished, per curiam decision.

On Wednesday, the ACLU and NAACP Legal Defense and Educational Fund announced they asked the Michigan Supreme Court to hear their appeal.

ACLU of Michigan Legal Director Michael Steinberg said Detroit’s tax foreclosure process is a “government-created catastrophe that is destroying neighborhoods and undermining the city’s economic recovery.”

“Nobody should lose their home for inability to pay taxes they never should have had to pay in the first place,” Steinberg said in a statement.

Wayne County spokesman Bruce Babiarz declined to comment on the ACLU’s application for leave to appeal, as did Charles Raimi, deputy corporation counsel of the Detroit Law Department. 

In court papers, ACLU staff attorney Daniel Korobkin argued that the trial court misinterpreted the FHA, which gives plaintiffs a right to litigate civil claims in court rather than before an administrative body. He said the court improperly ruled that under Michigan law, the homeowners must present their FHA claim before a tax tribunal.

Korobkin said that the issues in the case fall outside the tribunal’s “narrow expertise” and that an administrative agency cannot decide them.

“Michigan courts have broad powers, including the power to hear federal fair housing claims, and cannot shut the courthouse door to plaintiffs’ claim under the FHA simply because it relates to an issue of taxation,” according to the application for leave to appeal.

The homeowners are asking the Michigan Supreme Court to hear their case as soon as possible. The ACLU says that homeowners are facing another round of foreclosures in February 2018.

In recent foreclosure auctions, Wayne Count sold thousands of homes owned by people who were unable to pay their property tax bills. Two of the named plaintiffs are facing eviction next year, according to the ACLU.

Still pending in circuit court is the homeowners’ claim that Detroit has made it unduly burdensome for homeowners to get a poverty exemption for the property taxes.

City officials denied homeowner Walter Hicks’ exemption based on the assumption that a property owner with the same name owned another piece of property. Even after he proved that he did not hold the asset, the city refused to exempt him, according to the ACLU.

In addition to the ACLU and NAACP Legal Defense and Educational Fund, the law firm of Covington & Burling also represents the plaintiffs.

In their filings, the homeowners said that over the last decade more than 130,000 parcels in Detroit had been forced into foreclosure and that Wayne County had auctioned 78,000 parcels in tax foreclosure actions.

The ACLU and the NAACP Legal Defense and Educational Fund did not immediately respond to requests for comment on Thursday.

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