Federal Court Approves Settlement to Return Surplus Funds to Former Kent County Property Owners

Grand Rapids, MI (July 17, 2024) – A federal court has approved a settlement that will return extra money to people who lost their property in Kent County due to unpaid taxes between 2013 and 2020.

On July 12, 2024, Judge Paul L. Maloney of the U.S. District Court of the Western District of Michigan approved the settlement stemming from a 2014 lawsuit. The case, Wayside Church v. Van Buren County, involved three property owners who lost their properties due to unpaid taxes. The properties were sold at county auctions for more than the owed taxes, but the property owners argued they should receive the extra money, citing the Fifth Amendment.

At that time, Michigan law did not mandate returning surplus funds from such sales. County treasurers were allowed to keep any extra money, often using it to cover losses from properties that didn’t sell or sold for less than the unpaid taxes. Most properties sold at foreclosure auctions do not generate surplus funds and usually do not cover the unpaid taxes, leaving counties to bear the difference each year.

In late 2020, the Michigan Supreme Court ruled the statute unconstitutional in the Rafaeli, LLC v. Oakland County case, exposing counties to potential liabilities from $500,000 to over $120 million.

The settlement, reached after lengthy negotiations mediated by the U.S. Court of Appeals for the Sixth Circuit, will allow former property owners to reclaim surplus proceeds.

“The assistance of the Sixth Circuit Mediation Office was essential to reaching this settlement,” said Kent County Corporate Counsel Linda Howell. “We’re very pleased to have reached this resolution.”

Former property owners had to file claims during the spring and summer of 2023 to benefit from the settlement. Judge Maloney noted that the claims rate was high and the relief substantial.

“This settlement resolves significant pending litigation in Kent County while providing an avenue for taxpayers to reclaim their surplus proceeds,” said Kent County Treasurer Peter MacGregor. “We’re thankful for the court’s decision, which helps bring this issue closer to complete resolution.”

For more information about the delinquent property tax timeline and process, visit the Kent County Treasurer’s website.

This information was sent in a news release 7/17/24 from the County. You too can sign up to receive notifications as well at accesskent.com