Volume 26, No. 3; Fall 1999

ENFORCEMENT OF PROPERTY TAX LIENS

by Robert F. Rhoades*

A. Introduction. The General Properly Tax Act (GPTA)¹ provides for the subjects of taxation (all tangible, real and personal property not exempt),² exemptions,³ a definition of cash value,⁴ assessed value,⁵ taxable value,⁶ and implementation of the cap on taxable values.⁷ These substantive provisions are, for the most part, applied uniformly throughout the state.⁸

Consistent with the Home Rule Cities Act, which requires cities to provide for collection of taxes in their charters,⁹ cities have been afforded the freedom to fashion their own collection procedures and some other procedures. This is accomplished within the GPTA by providing that certain provisions of that act are applicable where not inconsistent with a city charter.¹⁰ Provisions of the act that are subject to contrary city, charter provisions include: (1) the dates and procedural prerequisites for the local board of review,¹¹ (2) the structure of penalties and interest for failure to pay,¹² (3) lien dates,¹³ and (4) the system for return, collection sale, and foreclosure.¹⁴ Thus, city charters and codes as well as the GPTA must be consulted when such issues arise concerning the tax lien enforcement process. The cities of Detroit and Kalamazoo have by charter established provisions which are different than the GPTA, as described below. While no other cities are known to have enacted independent lien enforcement systems, other cities have presumably enacted different procedures for some tax procedures such as boards of review.¹⁵

Legislation enacted in 1998 has enhanced the power of cities to collect property taxes¹⁶ and 1999 legislation¹⁷ has amended the entire process of enforcing tax liens. The 1999 legislation entirely replaces the long-established county tax sales of liens to private investors. The new system generally applies to taxes levied in 1999. The county tax sale system will be used until 2002, in most counties.

This article will (1) review the long-established procedures provided by the GPTA for enforcing property tax liens, (2) describe the authority by which cities can establish separate procedures, (3) describe the procedures of the two cities which have enacted different procedures, (4) describe 1998 legislative changes permitting securitization and bulk sales of tax liens by cities, and (5) describe the 1999 legislation that has changed the entire procedure for taxes levied in 1999.

B. Tax Enforcement System provided by the GPTA using the County Tax Sale.

Under the system for collection of taxes provided in the GPTA, cities and townships assess all property and together with other taxing units levy taxes annually. Cities and townships also bill and collect both city and township taxes and taxes for the taxing unit. The city and township treasurers post a bond and receive a warrant authorizing them to collect the taxes. The power of distraint and suit can be exercised by the township or city treasurers as long as they are authorized by their warrants to collect the tax.¹⁸

Upon delinquency (March of the year after levy), the taxes on real property are "returned" to the county treasurer.¹⁹ The county treasurer can issue delinquent tax anticipation notes (D-TANs) by which it borrows money to be repaid with interest from the proceeds of the taxes, interest, and penalty fees to be collected. The taxing units the taxes of which are returned to the county, are paid from the D-TAN proceeds, but remain ultimately at risk for unpaid taxes. Delinquent personal property taxes are not returned. The city or township treasurers continue to collect personal property taxes. If those taxes cannot be collected, the tax is cancelled after five years.²⁰

Concerning the real property taxes, which are returned to the county treasurer, the county is required to send notices to the taxpayers of record, and to "occupant" if there is no taxpayer of record, before tax sale at the end of the second and third year.²¹ The county then petitions the circuit court to sell the tax liens at the annual tax sale.²² Notice of the tax sale is published and a notice is sent to the taxpayers of record.²³ There is no title search or notice to all parties in interest before this circuit court hearing. The county tax sale is held (or begins) on the first Tuesday in May of the third year after the tax year. Thus, the 1995 taxes were sold at the May 4, 1999 tax sale.

At the county tax sale on the first Tuesday in May, private parties may bid. The amount of money bid at the county tax sale is the amount of tax, penalty and fees for the one year's lien being sold. The competition, if any, among bidders is in bidding for smaller interests in the property. If no one bids, the property is bid in to the state.²⁴ The successful bidder receives only a tax certificate.

Whether the lien was sold to a private party or bid in to the state, the redemption period starts with a one-year right of redemption pursuant to MCL 211.74. During that time, the property can be redeemed by paying to the county treasurer the one year's tax, interest, penalty, and fees that were sold at the tax sale. Liens that were bid in to the state may be purchased from the state by any private party and, if this is done, one proceeds as if the private party had been the successful bidder at the tax sale. At the end of the one year redemption period, a "tax deed" is issued by the state. If the property was bid in to the state, the state issues the tax deed to itself.²⁵ The tax deed does not yet grant the successful lien purchaser the right to possession.

The procedures for redemption after one year vary depending upon whether the tax lien was purchased by a private party or bid in to the state. Under either scenario, there is an additional redemption period of at least six months. If the lien was purchased by a private party, this additional redemption period is provided by MCL 211.140, which provides six months from the time notice is sent by the lien buyer to all parties with an interest in the property. During this period of time, an additional 50% penalty must be paid to redeem. After this redemption period, the county treasurer records with the register of deeds the Returns of Service or Proof of Publication and MCL 211.140 notice, which evidences the new owner's title. The private tax deed holder can then file a petition in circuit court for possession.

If the lien was bid in to the State, MCL 211.131(c) and MCL 211.131(e) apply. Section 131(c) extends the redemption period for six months following the one year afforded by MCL 211.74. In order to redeem during this period, however, one must pay the tax, penalty, interest, and fee for which the property was sold plus all other taxes, interest, and penalties on the property, plus a penalty of 50% of the tax for which the property was sold. The §131(c) period is followed by a §131(e) period that further extends the right to redeem until the state inspects the property, serves notices on parties in interest, and until thirty days after the state holds a hearing (the so-called "Dow Hearing"). Absent a valid objection or payment, the redemption period will end thirty days after the Dow Hearing. The § 131(e) redemption period is the last redemption period available for properties bid to the state at the annual tax sale. In theory, the process can be accomplished in about 41/2 years after the tax year in which the assessment was made (3 years before the sale + 1 year §74 redemption period + 1/2 year §131(c) redemption period, + 30 days after the Dow Hearing). In practice, the inspection, title search, and notice process can extend this by about 18 months.

C. Authority for Cities to Provide for Separate Procedures.

Mich Const 1963, Art 7 §21 and §34 provide that the legislature must provide for the incorporation of cities that shall have the power to adopt charters, ordinances, and resolutions, according to law.

The Home Rules Cities Act, MCL 117.1 et seq. Section 3, subsection i, provides:

The Home Rule Cities Act also provides:

The power of a city to establish tax collection and lien foreclosure procedures different than those described in the General Property Tax Act has been upheld.²⁷

D. The City of Detroit’s Collection and Foreclosure Procedures.

The City of Detroit, pursuant to §8-403 of its charter, has adopted its own provisions for the collection and enforcement of delinquent taxes, which are different than the procedures provided for in the General Property Tax Act.

Detroit's Charter §8.403 provision is as follows:

Collection of Property Taxes.

1. Except as otherwise provided by this charter or ordinance, the rights, duties, powers, and immunities established by state law shall apply in the collection and enforcement of city property taxes.
2. City property taxes shall become a debt of the persons liable for them on the date provided by state law and shall become payable, and a lien upon the property, on the first (1st) day of the city's fiscal year or such other date as may be provided by ordinance.
3. Property taxes shall become delinquent if they remain unpaid on September 1. However, when any person shall pay one-half (1/2) of the city taxes on any property on or before the fifteenth (15th) day of August, the remaining one-half (1/2) shall not become delinquent until the sixteenth (16th) day of January. The city may, by ordinance, provide interest and penalties for delinquent city property taxes.
4. State, county, and school taxes shall be collected and returned by the city treasurer in accordance with state law. However, except as otherwise provided by law or ordinance, city property taxes shall not be returned to the Wayne County treasurer under state law.
5. Before the end of the City's fiscal year, the treasurer shall give reasonable notice to all persons who are liable for delinquent real property taxes that, on the last day of the fiscal year, the City's lien on real property for delinquent city real property taxes shall be deemed "sold" to the finance director. Thereafter, the finance director, with the concurrence of the planning and development director or any other department director designated by the mayor, may sell the lien in accordance with procedures provided for by ordinance adopted by the city council. Any such ordinance adopted shall provide for appropriate hardship protections. The ordinance may also provide for public notice of the sale of the lien to a third party. The council may at any time review and revise the procedures and protections established by any such ordinance adopted to determine their appropriateness and effectiveness. However, two (2) years following the enactment of any such ordinance, the city council shall review the procedures and protections established by that ordinance to determine their appropriateness and effectiveness.
6. Two (2) years after such a sale of the lien on any real property to the finance director, the City or other holder of the lien may bring a civil action to foreclose its lien. If the city or holder of lien prevails in the action, the judgement, which may not be entered before one-hundred and twenty (120) days have expired from the filing of the complaint, shall provide that possession of the real property to which the lien attached shall be given to the city or other holder of the lien, unless the judgement and all costs are paid within sixty (60) days. The judgement when final shall be conclusive evidence of the City's or other lienholder's title in fee simple, subject only to unextinguished interests or encumbrances.
7. In addition to the other remedies specified in this section, at the time unpaid city property taxes become delinquent or at any later time permitted by law, the city may maintain a personal action against the debtor for collection of the unpaid property taxes and may use any means permitted by law for collection of the debt. The City of Detroit tax roll shall be prima facie evidence of the amount of the indebtedness to the City of Detroit. The preceding Sections of 8-403 are not the exclusive remedies of the City of Detroit.
8. In addition to the procedures and remedies for the collection and enforcement of the property taxes set forth in this Charter, the city or other lienholder may use any procedure and remedy for the collection and enforcement of property taxes established by state law.

The city uses its procedures to collect its own taxes and, pursuant to the School Code, MCL 380.1611, the School District of the City of Detroit has requested that the city also collect the local school taxes. The State Education Tax (6 mills) is billed and is collected by the city until delinquency. It is then returned to the county for further collection or tax sale.

The city assesses, levies and bills taxes annually. Its treasurer's office has a Collection Division, which actively attempts to collect taxes. By Charter §8-403(5), at the end of one year, taxes are "deemed sold" to the finance director. This sale occurs on June 30 following delinquency. The delinquent city and local school taxes are not returned to the county.²⁸ This permits the treasurer's office to use distraint for more than one year. The city's Collections Division continues to try to collect both real and personal property taxes, as well as any special assessments. At the end of three years (two years after the deemed sale), the property is foreclosable and, following a warning letter, sent to the, taxpayers of record, delinquency is referred to the Law Department which undertakes a title search to determine all parties with an interest in the property. A circuit court complaint is then filed seeking a judgement of foreclosure. While labeled a foreclosure, the procedure is actually a forfeiture because there is no auction. If the property taken is worth more than the tax lien, there is no mechanism for the delinquent taxpayer to retain that equity without paying the tax.

The circuit court complaint seeking foreclosure and a summons are served on the taxpayer of record and all parties with a recorded interest in the real property, in the same manner as service is affected in any other circuit court action. Those parties have the right to file an answer and defend, but that is rarely done. The charter requires a 120-day waiting period before a judgement (most often by default) can be taken (Charter §8-403(6)). There is a 60-day redemption period after judgement, after which the property is owned by the City (Charter §8-403(6)). The entire process can be accomplished in 3 ½ years (1 year before the deemed sale + 2 years before foreclosure can begin + 120-day waiting period +60-day redemption period). Since 1997, Charter §8-403(6) authorizes sale of the city's lien to third parties who may foreclose using the same procedures.

E. City of Kalamazoo's Tax Collection and Procedures.

The Kalamazoo City Charter²⁹ also provides for tax procedures that are different than those provided in the GPTA concerning the local board of review,³⁰ liens³¹ installment payment³² interest and penalties,³³ and tax sales.³⁴

Taxes collected by Kalamazoo may be paid in installments beginning with a payment on July 1 of the year of the assessment through June 1 of the following year.³⁵ On August 1, the tax is delinquent,³⁶ on September 15 a notice is published, and on October 15 of the year following the assessment, the delinquent taxes are sold to the city or the city commission may, by resolution, provide for the lien to be sold at auction. For many years the city has used a closed sale to itself. There is a two-year redemption period after the sale of the lien,³⁷ after which an additional 50% penalty is imposed (which the commission may increase to 100%), and the lien may be referred for foreclosure, although the liens are not always referred immediately. The foreclosure process is by circuit court action in which, pursuant to Charter §91(b), the following persons are notified by registered mail:

There is a 120-day waiting period before a decree is entered and a 60-day redemption period following the judgement of foreclosure.³⁹

The city has absolute title thereafter subject to state or county tax liens.⁴⁰ The city may take possession, lease, or sell the property but does not in practice do so. The city's practice has been to record its interest and use that as leverage to collect when the property is sold, sometimes many years later.

F. Recent Legislation Permitting Securitization and Bulk Sales of City Tax Liens.

In 1998, the legislature amended the GPTA⁴¹ and enacted the Tax Lien Sale and Securitization Act⁴² to facilitate the sale of city tax liens in bulk or the securitization of the liens.

The amendment to the GPTA was principally to §107, which clarified the power of cities to enact their own sale procedures and to sell liens. It also allows a purchaser of city liens to buy county liens and add the amount paid to the city lien, a right likely already existing pursuant to §53(4) of the GPTA.

Securitization of city tax liens permitted by 1998 PA 379 involves selling all or selected sets of liens to a trust. The trust sells bonds to pay the purchase price. The purchase price maybe less than the face amount of the liens. The exact amount would depend upon the rating agency's assessment of the lien to value ratio of the lien portfolio, differences in interest rates on the liens and market rates, and other matters. The trust would retain a servicer to collect the tax amounts using the same procedures available to the city. The collection proceeds are used to pay the bonds. Any excess of collected tax amounts after expenses and repayment of the bonds would constitute a reserve payable to the city. The bondholders bear the risk of slow or insufficient collections. Tax lien securitization has been used in New York City, Philadelphia, and Puerto Rico. The new act also authorizes bulk sales of tax liens. Unless the act is amended, the bulk sale and securitization procedures can be used for only two years. After that time, only liens on properties on which previous liens have been sold may be sold pursuant to the 1998 legislation. Thus, the 1998 legislation provides an experiment with this process and provides a mechanism to clean up existing backlogs in uncollected liens, but is not a long term policy.

G. 1999 Amendment Abolishing County Tax Sales and Adopting a System of Forfeiture, Foreclosure and Sale.

Effective July 23, 1999, 1999 PA 123 amended the property tax act to abolish the county tax sale and eliminate the sale of tax liens to private purchasers. The new legislation provides that, for taxes levied after December 31, 1998, tax delinquent property will be subject to forfeiture, foreclosure, and sale.⁴³ The sale of tax liens will end in May 2002. County treasurers may also cancel the 2000 and 2001 year tax sales if there are no outstanding bonds or notes issued by the County for tax delinquent property.⁴⁴

The forfeiture and foreclosure system will be administered by the counties. Counties may however, elect to have the state foreclose. The foreclosures are not an activity required of a local unit for funding pursuant to the Headlee Amendment.⁴⁵ Counties may also enter into agreements with local units to permit a local unit to collect and foreclose upon property taxes within the local unit.⁴⁶

Property is subject to forfeiture upon return of delinquent taxes to the county.⁴⁷ Taxes are returned delinquent on March 1 following the year in which they were levied, and a 4% county administration fee and interest at 1% per month is added at that time. The lien purchaser under the Tax Lien Sale and Collateralized Securities Act could purchase the subsequent liens on the same property and enforce those liens.⁴⁸ On June 1 and September 1 following return to the county (for 1999 taxes, this would be 2000), a notice must be sent by first class mail, address correction requested, to (1) persons identified as the owner on the last tax bill or the person listed as the owner when the taxes were returned, (2) persons entitled to notice by virtue of having requested notices be sent to them and (3) persons to whom previous tax certificates have been issued (following sale of previous tax sales).⁴⁹

The June 1 and September 1 notices would include:

c. a legal description or parcel number of the property and the street address of the property, if possible;

d. the person or persons to whom the notice is addressed;

e. the total taxes, interest, penalties, and fees due on the property;

Persons with unrecorded interests who wish to receive notices may receive notices for payment of an annual fee of $5.00. Holders of undischarged mortgages may receive notices for payment of a $1.00 fee⁵¹ Persons who have purchased liens from a city pursuant to the Michigan Tax Lien Sale and Collateralized Securities Act⁵² may receive a list of parcels to which notice should be sent in computer generated form upon payment of costs.⁵³

On October 1, a $15.00 fee (adjustable under §78 p) is added.⁵⁴

On November 1, the county treasurer must prepare a list of properties subject to forfeiture.

By December 1, the county treasurer must obtain the following information for each property on the list:

a. the street address of the property;

b. the name and address of owners;

c. the holder of any undischarged mortgage or other legal interest:

d. a subsequent purchaser under any land contract; and

e. any person entitled to notice.

The treasurer is only obligated to base its search for this information on information in its office and that of the local assessor and local treasurer.⁵⁵ On February 1 (eleven months after the taxes were returned), a third notice of forfeiture is sent by the treasurer.

The third notice is to be sent by certified mail, return receipt requested, to the person to whom a tax bill for property returned for delinquent taxes was last sent and, if different, to the person identified as the owner of such property as shown on the current record.⁵⁶ This notice is also to be mailed to the property by first-class mail, addressed to "occupant," if the notice was not sent to the occupant by certified mail.⁵⁷

Under the new legislation, a county treasurer could insert one or more additional notices in a newspaper.⁵⁸

On March 1, certified abandoned property and property that is tax delinquent for 1 year or more is forfeited to the county treasurer for the amount of tax interest, penalty, and fees then due plus an additional fee of $175.00 per parcel. The county treasurer shall not have the right to possession until twenty-one days after judgement of foreclosure is entered ⁵⁹

Within forty-five days, the county treasurer shall record a certificate of forfeiture. If the county elects to have the state foreclose, it forwards the certificate and $175 to the state. That fee can be paid from a revolving fund to the State Land Reutilization Fund.⁶⁰ Forfeiture allows the county to seek foreclosure, but does not vest the county with the right to possession until after foreclosure.⁶¹

Property can be redeemed at any time prior to twenty-one days following entry of a judgement of foreclosure by paying to the county treasurer:

a. the total amount of unpaid delinquent taxes, interest, penalties, and fees for which the property was forfeited:
b. additional interest computed at a noncompounded rate of one-half percent per month or fraction of a month on the taxes that were originally returned as delinquent, beginning with the immediately preceding March 1; and
c. all recording fees and all fees for service or process.⁶²

Redemption, as under the former system, does not increase the redeeming party's interest in the property but the redeeming party does obtain a lien interest equal to the amount paid to redeem.⁶³ Upon redemption, the treasurer makes a record of redemption and issues four copies of a redemption certificate. One copy of the certificate would be delivered to the person making the redemption payment one filed in the office of the county treasurer, one recorded in the office of the county register of deeds, and one immediately transmitted to the department of treasury. A certificate and the entry of the certificate in the tax record by the county treasurer is prima facie evidence of redemption.⁶⁴

On or before June 15, the foreclosing governmental unit (the county or state) files a petition with the clerk of the circuit court listing the property forfeited and not redeemed, the amount owing and address of each parcel. The petition requests that judgement be entered vesting the foreclosing governmental unit with absolute title without right of redemption. Before a hearing on the petition, the foreclosing unit must file proof of any notice or service required.⁶⁵ Property can continue to be redeemed after the filing of the petition for foreclosure and until twenty-one days after the judgement is entered. If the property is redeemed before foreclosure, the county will request that it be removed from the petition.⁶⁶ Certain properties, the title to which is held by minor heirs or persons who are incompetent or without means of support, can be withheld from foreclosure until guardian is appointed. Property, the title to which is held by a person "undergoing substantial financial hardship;" may also be withheld from foreclosure.⁶⁷ Withholding from foreclosure does not prejudice the tax liens or the right to later seek foreclosure. A hearing on the foreclosure petition is to be scheduled within 30 days before the next March 1(2 years after return, which leaves about 6 ½ months from the June 15 petition date).

Not later than May 1 immediately succeeding the forfeiture of the property, the foreclosing unit must conduct a title search to identify owners with property interests who are entitled to notice. The foreclosing units may contract with licensed title insurance companies or agents to perform title searches to identify the owners of a property interest and to perform other functions.⁶⁸

The foreclosing unit or its representative is required to determine the address reasonably calculated to apprise owners of a show cause hearing, or the foreclosure hearing, and to send notice of those hearings to the owners by certified mail, return receipt requested, no less than thirty days before the hearing.

The failure of the foreclosing unit to comply with any provision of this section would not invalidate any proceeding if the owner of a recorded property interest was accorded the minimum due process required under the Michigan Constitution.⁶⁹

The persons entitled to such notice are: "Owners of a property interest," persons who paid the annual fee to receive notices under §78a (4), and persons to whom a tax deed has been issued. Notices of foreclosure are to be sent by certified mail, return receipt requested. Notices are to be sent at least thirty days before the hearing.⁷⁰

Section 78i(7) ,however, provides that an owner of a property interest is only entitled to notice of the show cause hearing and foreclosure hearing if that owner's interest is identifiable by reference to any of the following by the date the county is required to record the Section 78g(2) certificates (that date is 45 days after forfeiture) and the referenced certificate is the certificate of forfeiture:

a. records in the register of deeds office,
b. tax records in the county treasurer's office,
c. records in the local assessor's office,
d. records in the local treasurer's office.⁷¹

Owners of unrecorded interests and newly-recorded interests beware: Even a holder of a recorded interest will not be entitled to notice if the interest is recorded forty-five days or more after forfeiture.

The foreclosing governmental unit or its representatives are required to make a personal visit to each parcel of forfeited property to ascertain whether the property is occupied. If the property appears to be occupied, the foreclosing governmental unit is required to:

a. attempt to personally serve a person occupying the property;

b. if the occupant was present, to orally inform occupant (1) that property will be foreclosed and the occupants will be required to vacate unless all unpaid delinquent taxes, interest, penalties, and fees were paid, (2) of the time within which the fees would have to be paid, and (3) of agencies or other resources that may be available to assist the owner to avoid loss of the property;

c. if the occupant appears to lack the ability to understand the advice given, to notify the Family Independence Agency (FIA) or to provide the occupant with the names and telephone numbers of the agencies that may be able to assist the occupant; and d. if unable to personally serve notice, to place a notice written in plain English in a conspicuous manner on the property.⁷²

The foreclosing governmental unit records the proof of service of the notice of the show cause hearing, the foreclosure hearing, and the personal visit to the property with the register of deeds.⁷³ If the foreclosing unit enters into a contract with a title insurance company or licensed agent, the foreclosing governmental unit would be required to provide the proof of service to the title insurance company or agent. Within ten days after receiving proof of service, the title insurance company is required to notify the foreclosing governmental unit in writing of any deficiency in service, and the foreclosing governmental unit is required to correct that deficiency and provide the proof of the correction.⁷⁴

If the address of an owner of interest cannot be ascertained or if the foreclosing unit is unable to serve the owner, it may be required to serve notice by publication. The notice is to be published for three successive weeks, once each week, in a newspaper published in the county where the property is located, or, an adjoining county if there is no newspaper in the county where the property is located. Proof of publication is recorded with the register of deeds.⁷⁵

As noted earlier, proof of service of the notice of show cause, the foreclosure hearing, and the personal visit must be filed with the register of deeds.⁷⁶ The show cause hearing must be held by December 31 preceding the foreclosure hearing. At the show cause hearing, the owner and any person with a recorded property interest may appear and redeem the property, or show cause why absolute title should not vest in the foreclosing governmental unit. If the owner prevails, the foreclosing governmental unit is to correct the tax roll to reflect the determination.⁷⁷ A person claiming an interest in a parcel referenced in a foreclosure petition may contest the foreclosure for any of six specified reasons (invalidity, payment, jurisdiction, exemption, fraud, or invalid description).⁷⁸

Written objection to the foreclosure must be filed and served by the objecting person.⁷⁹ The court will rule upon such objections, and may also withhold from foreclosure properties of minors, heirs, incompetents, and persons without means of support.⁸⁰ (Note that this is a more narrow standard that the foreclosing unit can use to ask to have a property removed from the foreclosure list than the "substantial financial hardship" standard.) Withholding of such properties from foreclosure does not prejudice the tax lien or the right to seek foreclosure the next year. Id.

The court's judgement will provide:

A final foreclosure judgement extinguishes all interests recorded and unrecorded (with some exceptions described above). Appeals to the Court of Appeals may be taken; however, the taxes, interest, penalties, and fees must be paid within twenty-one days to do so. The foreclosure judgement is stayed by such an appeal.⁸¹

An owner who is served may not assert that its redemption period is extended by failure of notice to another owner who should have been served⁸² and, in determining who must be served, a violation of the act's requirements are to be construed as harmless, giving rise to no claim unless due process is denied.⁸³ An owner claiming that if did not receive a required notice may not bring an action for possession, but is limited to a suit for damages limited to the fair market value as of the date of foreclosure. Such suit must be brought within two years of an entry of the foreclosure judgement.⁸⁴ The foreclosing unit records its judgement or notice of judgement with the register of deeds.⁸⁵

Once the foreclosing unit forecloses, there is a procedure for dispositions of the properties. By the first Tuesday in July immediately following the entry of judgement vesting absolute title to tax delinquent property in the foreclosing unit, the state is granted the right of first refusal to purchase property at the greater of the minimum bid or its fair market value. If the state elects not to purchase the property, a city, village, or township may purchase for a public purpose any property, located, within that city, village, or township set forth in the judgement and subject to sale by payment to the foreclosing governmental unit of the minimum bid. If a city, village, or township does not purchase the property, the county may do so. On the third Tuesday in July following the entry of the foreclosure judgement, the foreclosing unit, or its representative must hold auction sales. The property would have to be sold to the person bidding the highest amount above the minimum bid, and could be offered as individual parcels or as two or more parcels for sale as a group. The deed would vest fee simple title to the property in the person bidding the highest amount above the minimum bid⁸⁶

The minimum bid includes all delinquent taxes; interest, penalties, and fees due on the property as of March 1 as provided in the judgement, unless the property is purchased by a city, village, or township, plus the expenses of administering the sale, which includes all preparations for the sale.⁸⁷

If the property does not sell for the minimum bid at the first auction, it will be offered at a second auction in September, again with a minimum bid.⁸⁸

If there is no buyer at the second auction, the property is offered at a third auction in November without a minimum bid requirement.⁸⁹

If there is no bidder at the third auction sale, the property is transferred to the city, village, or township and would be available for urban homesteading. The local unit could object to taking the property, in which case the property would be retained by the foreclosing unit.⁹⁰

Forms for proof of service, publication, and judgements are to be prepared by the state treasurer with input from county treasureres.⁹¹

Fees are to be adjusted annually by the state treasurer. There will be a fee of $15.00 or more, imposed October 1 after return of unpaid taxes and $175.00 or more for property forfeited to the county.⁹² By December 31, 2003, a committee of county treasurers are to submit a report to the House and Senate Committees or local government state and urban affairs on the tax collection process.⁹³

The application process for issuing revolving fund notes is transferred from the Municipal Finance Commission to the Department of Treasury.⁹⁴ The practice of paying county treasurers a percentage fee is phased out. Such fees will not be paid to new county treasurers. Re-elected incumbents, however, would still be eligible for such payments.)⁹⁵

Act 123 was enacted together with three other acts. 1999 PA 132 and 133 allow the tax revision process to proceed faster as to "certified abandoned property." A similar procedure has existed since 1993 but has been largely unused.⁹⁶ Of potentially greater significance is 1999 PA 134, the Tax Reverted Property Emergency Disposal Act, which is intended to allow local units to obtain clear title to tax-reverted properties, title to which vested in them before January 1, 2000. An emergency can be declared in an area of a unit in which there are many tax reverted properties of uncertain title impairing the ability to market the properties and contributing to blight and deterioration. Once an emergency is declared, redemption rights are not transferable. Such units may then contract with title insurance companies to identify persons with a recorded interest. Notice must be sent to persons with a recorded interest by certified mail and to occupants by first class mail. If the certified mail is returned undelivered, notice by publication is used.

In summary, the new system of forfeiture, foreclosure, and sale provided by 1999 PA 123 would, for taxes levied in 1999, work as follows:

3-1-2000 1999 taxes become delinquent. 4% fee,1% per month interest.

6-1-2000 First Notice sent to tax bill recipient or owner.

9-1-2000 Second Notice sent to tax bill recipient or owner.

2-1-2001 Third Notice sent by certified mail to tax bill recipient, owner, and some others known to the treasurer's offices, and to occupant.

3-1-2001 Statutory forfeiture, no right to possession until judgement of foreclosure is entered about one year later. During that year, notices will be sent and foreclosure suits will be filed. The county can opt out at this point and the state will take over or the county can continue.

5-1-2001 Title searches are to be done. The county (or the state if the county opts out) must hire a title or earlier insurance company to determine who is to receive Dow notices $175 fee applies. Certificate of forfeiture is recorded forty-five days after forfeiture. Interest increased to 1 ½ %.

6-15-2001 Petition for foreclosure is filed. Petitions must be served in time to permit notice of show cause hearing. A personal visit must be made to each property.

3-16-2002 Hearing on foreclosure is held and judgement of foreclosure is ordered. Redemption period ends twenty-one days later. All liens prior and subsequent to the tax liens are cancelled at this time (except current tax liens, future installments of special assessments and EPA liens). All interests are cancelled except for visible or recorded easements, private deed restrictions, restrictions under the Natural Resources and Environmental Protection Act or "other governmental interests." Absolute title vests in county.

City, village or township, may buy the property for the minimum bid price (all tax, penalty, interest, and fees).

September If the minimum bid is not offered at the July auction, the property is offered at auction again in

2002 September, using the same minimum bid.

November If the minimum bid is again not offered in September, the property is auctioned without 2002 reserve. If there is no bid at all the property reverts to the county (or state, if the county opted out.)

The Real Property Law Section of the Michigan Bar took a position on the 1999 legislation. Its principal concern was that the notice provision, which does not require the foreclosing unit to search for unrecorded interests that may arise in divorce or probate situations, may not comply with the requirements of due process.⁹⁷ The section was also concerned with the provision by which those who are not given notice can receive only money damages.

Another concern is whether title insurance companies will be able to process all of the title searches in the time available or whether the searches will be rushed, thus increasing the error rate.

Concerns were expressed during the fast track legislative committee hearings about the effect of the then proposed, system on cities that collect their own taxes and that have foreclosure systems. The reference to "other governmental interests" as interests that would survive foreclosure was added to protect such city tax liens.

As in any new system there will be problems and possibly amendments. The new legislation, however, clearly, adopts a somewhat faster and tougher position on tax delinquencies. The movement away from an auction of liens to forfeitures is certainly tougher and the process of taking a tax delinquent parcel will be about a year faster than the previous system could have worked and perhaps three or more years faster than the previous system often worked in fact.

1. MCL 211.1 et. seq.
2. MCL 211.2.
3. Most, but not all, exemptions are provided by MCL 211.7 and MCL 211.9.
4. MCL 211.27
5. MCL 211.27a(1).
6. MCL 211.27a(2):
7. MCL 211.27a(2)-(9).
8. Some exemptions such as those for property subject to Industrial Facilities Exemption Certificates and the poverty exemption are effectively local option or locally defined exemptions, which raises concern based on Const. Art 9 §3 which is outside the scope of this article.
9. MCL 117.1(i).
10. MCL 211.107.
11. MCL 211.107. See Nate Fink v City of Detroit, 124 Mich App. 44; 333 NW2d 376 (1983).
12. MCL 211.107.
13. MCL 211.107.
14. MCL 211.107.
15. Grand Rapids, Wyandotte, Wyoming, and Detroit, for example, require an assessor's review as a prerequisite to a local board of review protest.
16. 1998 PA 378.
17. 1999 PA 123.
18. MCL 211.47.
19. MCL 211.55.
20. MCL 211.56(a).
21. MCL 211.57(2), 211.57(3).
22. MCL 21160.
23. MCL 211.60a.
24. MCL 211.70.
25. MCL 211.72.
26. Nate Fink v City of Detroit, 124 Mich App 44; 333 NW 2d 376 (1983).
27. Detroit v Safety Investment Corp. 288 Mich 51; 285 NW 42 (1939); City of Detroit v Collateral Liquidation, Inc., 295 Mich 440; 295 NW 218 (1940); and City of Detroit v Alsip, 145 Mich App 794; 378 NW2d 603 (1985).
28. The six mil state education tax is returned to the county upon delinquency for collection or tax sale.
29. The Kalamazoo Charter is available in its entirety on the City's Website www.ci.kalamazoo.mi.us.
30. Kalamazoo Charter §81.
31. Kalamazoo Charter §86.
32. Kalamazoo Charter §87.
33. Kalamazoo Charter §87.
34. Kalamazoo Charter §88:
35. Kalamazoo Charter §87.
36. Kalamazoo Charter §88.
37. Kalamazoo Charter §90b.
38. Kalamazoo Charter §91b.
39. Kalamazoo Charter §90(c).
40. Kalamazoo Charter §90(d).
41. 1998 PA 378, which Amended §107 of the GPTA.
42. 1998 PA 379.
43. MCL 211.78 et. seq.
44. MCL 211.60(2).
45. MCL 211.78(3)-(4).
46. MCL 211.78(5).
47. MCL 211.78a(1).
48. MCL 211.78a(5).
49. MCL 211.78b.
50. MCL 211.78b.
51. MCL 211.78a(4).
52. 1998 PA 378; MCL 211.921.
53. MCL 211.78a(5).
54. MCL 211.78d.
55. MCL 211.78e(2).
56. MCL 211.78f(1).
57. MCL 211.78f(2).
58. MCL 211.78f(3).
59. MCL 211.78g(1).
60. MCL 211.78g(2).
61. MCL 211.78(6)(b).
62. MCL 211.78g(3).
63. MCL 211.78g(4).
64. MCL 211.78g(5).
65. MCL 211.78h(1).
66. MCL 211.78h(2).
67. MCL 211.78h(3)(b).
68. MCL 211.78i(l).
69. MCL 211.78i(1)-(2).
70. MCL 211.78i(2).
71. MCL 211.78i(7).
72. MCL 211.78i(3).
73. MCL 211.78i(4).
74. MCL 211.78i(5).
75. MCL 211.78i(6).
76. MCL 211.78i(4) .
77. MCL 211.78j(2)-(3).
78. MCL 211.78k(2).
79. MCL 211.78k(3).
80. MCL 211.78k(4)
81. MCL 211.78k(7).
82. MCL 211.78i(9).
83. MCL 211.78(2).
84. MCL 211.78l(1)-(4).
85. MCL 211.78k(8).
86. MCL 211.78m(1)-(2).
87. MCL 211.78m(10)
88. MCL 211.78m(4).
89. MCL 211.78m(5).
90. MCL 211.8M(6)-(7).
91. MCL 211.78o.
92. MCL 211.78p(1).
93. MCL 211.78p(4).
94. MCL 211.87c(7).
95. MCL 211.87c(16).
96. See 1993 PA 219.
97. The notice provisions, however, do appear to be as extensive as those used for several years.