What Happens If I Don't Pay Property Taxes in Michigan?

When homeowners don't pay their property taxes, the overdue amount becomes a lien on the property. A lien effectively makes the property act as collateral for the debt. All states have laws that allow the local government to sell a home through a tax sale process to collect delinquent taxes.

So, if your property taxes in Michigan are delinquent, you might lose your home to a tax forfeiture and foreclosure process. In this context, a "forfeiture" doesn't mean that you've lost your home. In Michigan, "forfeiture" means the county will eventually foreclose your home.

You'll get some time after the forfeiture to get current on the delinquent amounts to save your home from a tax foreclosure.

How Property Taxes Generally Work

People who own real property have to pay property taxes. The government uses the money that these taxes generate to pay for schools, public services, libraries, roads, parks, and the like. Typically, the tax amount is based on a property's assessed value.

If you have a mortgage on your home, the loan servicer might collect money from you as part of the monthly mortgage payment to later pay the property taxes. The servicer pays the taxes on the homeowner's behalf through an escrow account.

But if the taxes aren't collected and paid through this kind of account, the homeowner must pay them directly. (If you don't pay the taxes, the loan servicer might advance funds to pay them and then bill you for them. If you don't reimburse the servicer, the servicer could foreclose on the property using state procedures. See "Does a Mortgage Survive a Tax Forfeiture and Foreclosure in Michigan?" below.)

What Are the Consequences of Not Being Able to Pay Property Taxes in Michigan? (How a Michigan Tax Forfeiture Works)

On March 1 in each tax year, property that's delinquent for taxes, interest, penalties, and fees for the immediately preceding 12 months or more is forfeited to the county treasurer. (Basically, real estate is forfeited to the county treasurer when the taxes are in the second year of delinquency. )

But if a property is forfeited to a county treasurer, the government doesn't get a right to possession of the property until the April 1 immediately following the entry of a foreclosure judgment or, in a contested case, until 22 days after the foreclosure judgment (see below). (Mich. Comp. Laws § 211.78g).

You'll get about a year after the forfeiture to pay off the debt before losing the home in a tax foreclosure. This period is called a "redemption period," explained in more detail below.

Can I Face Legal Action for Not Paying My Property Taxes in Michigan? (How a Michigan Tax Foreclosure Works)

The foreclosure starts during the redemption period. The foreclosing party files a petition with the court no later than June 15th. (Mich. Comp. Laws § 211.78h).

If the taxes go unpaid, the court will enter judgment, generally, no later than late March of the next year, and the home is foreclosed. (Mich. Comp. Laws § 211.78k). Essentially, taxes that remain unpaid as of March 31 in the third year of the delinquency are foreclosed. The county treasurer then takes ownership of the property and can sell it to a new owner.

Notices You'll Receive in a Michigan Tax Forfeiture and Foreclosure

You'll receive various notices before the forfeiture and before you lose your home to the foreclosure, including the following.

Notice of Delinquent Taxes During the Collection Period

Before the forfeiture, the county treasurer has to send a first and second notice via first-class mail about the delinquent taxes. (Mich. Comp. Laws § 211.78b, § 211.78c).

The county treasurer must mail you another notice, this time by certified mail. Among other things, the notice will tell you when the property will be forfeited to the county treasurer if you don't get current on the unpaid delinquent taxes, interest, penalties, and fees. (Mich. Comp. Laws § 211.78f).

Notice During the Foreclosure Action

The foreclosing governmental unit must mail a notice not less than 30 days before a "show cause" hearing. (Mich. Comp. Laws § 211.78i). (A "show cause" hearing is part of the foreclosure process where the foreclosing party must demonstrate why it should get title to your home).

Personal or Posted Notice

If you occupy the property, the foreclosing party must try to serve you notice personally and tell you that, among other things, the property will be foreclosed unless the delinquent amounts are paid. If personal service isn't made, notice about the foreclosure must be posted on the property, and, in addition, a notice must be posted with the information that otherwise would have been verbally provided had personal service been accomplished. (Mich. Comp. Laws § 211.78i).

Can I Reclaim My Home After a Tax Forfeiture in Michigan?

You get a redemption period of about one year, during which you can pay off the delinquent amounts and redeem the home following the forfeiture (not the foreclosure).

Deadline to Redeem

Unless all unpaid delinquent taxes, interest, penalties, and fees are paid on or before the March 31 immediately succeeding the entry of a judgment foreclosing the property or, in a contested case, within 21 days of the entry of a judgment foreclosing the property, the title to the property goes to the foreclosing governmental entity. So, March 31st in the third year of the delinquency is generally the last day you get to redeem the home. (Mich. Comp. Laws § 211.78g).

But if you contest the foreclosure by filing a written objection with the court, your deadline to redeem is within 21 days after the court enters the foreclosure judgment. (Mich. Comp. Laws § 211.78k).

The property is sold after the court enters a foreclosure judgment and after the right of redemption has expired.

How Much It Costs to Redeem the Home

To redeem your property, you'll typically have to pay to the county treasurer:

• the total amount of unpaid delinquent taxes
• interest
• penalties, and
• fees. (Mich. Comp. Laws § 211.78g).

Can I Set Up a Payment Plan for My Tax Debt in Michigan?

Under certain circumstances, such as if you meet the federal poverty income standards, you might be able to enter into an installment payment plan to get caught up on the amount of taxes you owe. (Mich. Comp. Laws § 211.78q).

If you enter into a payment plan, the tax foreclosure will stop. Contact your county treasurer's office to learn how to apply for a property tax installment plan.

What Happens to Profits From a Michigan Tax Foreclosure and Sale?

Previously, under Michigan law, after officials foreclosed and then sold the property of a delinquent taxpayer, they could keep all proceeds above what was needed to pay off the tax debt. Most states refund the surplus, but Michigan was among a few states that allowed the government to keep the profits.

The Michigan Supreme Court's Decision in Rafaeli, LLC v. Oakland County

In 2014, Oakland County foreclosed on a home that Uri Rafaeli's business (Rafaeli, LLC) owned over an $8.41 tax debt. The County later sold the property for $24,500 and kept the profits. In a similar situation, Andre Ohanessian lost his property to the County, which sold it for $82,000. The County kept all of the proceeds over the $6,000 tax debt. Rafaeli and Ohanessian filed a suit challenging the legality of Michigan's law allowing the County to retain the profits after a tax foreclosure.

In 2020, the Michigan Supreme Court heard the case of Rafaeli, LLC v. Oakland County. It determined that homeowners who fail to pay property taxes shouldn't lose all their equity after their home is forfeited, foreclosed, and sold off.

Change in Michigan's Tax Law

The Michigan tax code was modified in December 2020 to align with the Rafeli ruling. (See Mich. Comp. Laws § 211.78t(1)). Under this statute, you must file a notice with the county by July 1 immediately following the effective date of the foreclosure to claim an interest in proceeds.

Then, in Proctor v. Saginaw County, the Michigan Court of Appeals ruled that the Michigan Supreme Court's 2020 decision in Rafaeli v. Oakland County applied retroactively and that the subsequent legislative change from December 2020 applied prospectively only.

U.S. Supreme Court Decision in Tyler v. Hennepin County

On May 25, 2023, the U.S. Supreme Court ruled in the case of Tyler v. Hennepin County that seizing and selling the homes of people with unpaid property taxes and keeping the proceeds over what was owed is unconstitutional.

The court decided that this pocketing of the profits from surplus home equity violates the Fifth Amendment's bar on the uncompensated taking of private property by a government for public use. (That is, it violates the "Takings Clause" of the U.S. Constitution).

How to Claim the Proceeds After a Michigan Tax Sale

Starting with the 2021 foreclosure auctions in Michigan, you may file a claim for the excess proceeds (if any) if you had an interest in a property when the tax foreclosure happened.

Talk to a local foreclosure lawyer, a real estate lawyer, or a tax lawyer to learn how to claim the excess proceeds after a tax foreclosure in Michigan.

What Options Do I Have If I Can't Afford to Pay My Property Taxes in Michigan?

Even though you'll get some time to redeem your Michigan home after a tax forfeiture, in most cases, it's better to take action earlier to try to make your taxes more affordable. For instance, before you fall behind in your taxes, you could:

• look into whether you meet the criteria for a property tax abatement, or
• challenge the taxable value of your home if you think it's incorrect.

More Information on Michigan Tax Forfeitures and Foreclosures

To get more information about tax forfeitures and foreclosures in Michigan, go to the state's Property Tax Forfeiture and Foreclosure website.

Getting Help

If you're already facing a property tax forfeiture and foreclosure in Michigan and have questions (or need help redeeming your property), consider talking to a foreclosure, tax, or real estate lawyer.