Michigan Tax Foreclosure
Prevention

Michigan presents a unique and evolving landscape for tax foreclosure surplus funds recovery. Historically, Michigan did not return surplus proceeds from tax foreclosure sales to former property owners — counties retained all proceeds. However, a landmark 2020 Michigan Supreme Court decision in Rafaeli LLC v. Oakland County (Case No. 156849) fundamentally changed this by ruling that the retention of surplus proceeds from tax foreclosure sales constitutes an unconstitutional taking without just compensation. This decision opened the door for former property owners to claim surplus funds, though the statutory framework for processing these claims is still developing. This whitepaper examines the current state of surplus fund recovery in Michigan and provides guidance for those seeking to recover funds. Note: This guide reflects information current as of April 2026. Tax foreclosure laws are actively evolving following the landmark Tyler v. Hennepin County Supreme Court decision (2023). Always verify current statutes and consult with a licensed attorney before taking action.

Michigan uses a tax reversion process for delinquent property taxes, governed primarily by the General Property Tax Act (MCL 211.1 et seq.). The process works as follows: 1. Property taxes become delinquent on March 1 of the year following the tax year. 2. After one year of delinquency, the unpaid taxes are transferred (forfeited) to the county treasurer. 3. The county treasurer holds a right of redemption for the property owner, typically lasting until March 31 of the third year of delinquency. 4. If the property is not redeemed, title is foreclosed and vests in the county treasurer through a judicial foreclosure proceeding in circuit court. 5. The county then sells the property, either through public auction or other disposition methods. The process is judicial — foreclosure of the right of redemption occurs through the circuit court. Properties are typically sold at county auctions, and historically all proceeds went to the county regardless of whether they exceeded the tax debt. The Rafaeli decision changed this framework by establishing that former owners have a constitutional right to surplus proceeds.

Surplus funds in Michigan are the proceeds from a tax foreclosure sale that exceed the total amount of delinquent taxes, interest, penalties, fees, and costs associated with the foreclosure and sale. Under the Rafaeli decision, the Michigan Supreme Court recognized that these surplus funds constitute the former owner's property, and retaining them is an unconstitutional taking under both the Michigan and U.S. Constitutions. Parties who may be entitled to surplus funds include: - The former property owner at the time of the tax foreclosure - Mortgage holders and lienholders with interests in the property - Heirs or legal representatives of deceased former owners - Any person with a recorded legal or equitable interest in the property It is important to note that similar cases have been reported as pending in all 83 Michigan counties, and there is a six-year statute of limitations. Some claims dating as far back as 2008 may still be actionable, though this depends on the specific circumstances and evolving case law. For mortgage foreclosure surplus, MCL 600.3135 (Section 3135) provides that proceeds of sale shall be applied to discharge the debt and costs, and any surplus shall be brought into court for the use of the defendant or the person entitled to it.

The legal framework for surplus fund recovery in Michigan is built on both statutory law and recent case law: 1. Rafaeli LLC v. Oakland County, Case No. 156849 (Michigan Supreme Court, July 17, 2020): The landmark decision establishing that county retention of surplus proceeds from tax foreclosure sales is an unconstitutional taking without just compensation. This case is the foundation for all tax foreclosure surplus claims in Michigan. 2. MCL 600.3135 — Proceeds of Sale; Application; Disposition and Investment of Surplus (Section 3135): Governs mortgage foreclosure surplus. Subsection (1) provides that surplus from judicial foreclosure sales shall be brought into court for the use of the defendant or person entitled to it. Subsection (2) states that if surplus remains in court for three months without being applied for, the court may direct it be invested at interest for the benefit of the defendant. 3. MCL 567.234, Section 14 — Presumption of Abandonment: Property held by a court, state, governmental subdivision or agency that remains unclaimed for more than one year after becoming payable or distributable is presumed abandoned. 4. General Property Tax Act (MCL 211.1 et seq.): Governs the overall tax foreclosure process in Michigan, though this statute is expected to be amended to reflect the Rafaeli ruling. The statutory framework specifically for tax foreclosure surplus is still evolving as the legislature works to create procedures consistent with the Rafaeli decision. Former owners should consult with local counsel for the most current procedural requirements. In Tyler v. Hennepin County (2023), the U.S. Supreme Court ruled unanimously that governments cannot keep surplus proceeds from tax sales beyond what is owed, finding this violates the Takings Clause of the Fifth Amendment. This landmark ruling has strengthened property owners' rights to surplus funds nationwide. 5. Post-Tyler Developments: Following the U.S. Supreme Court's decision in Tyler v. Hennepin County (2023), Michigan reached a $38 million settlement to address surplus proceeds claims. This settlement, combined with the earlier Rafaeli decision, has made Michigan a major reform state for tax foreclosure surplus recovery. The legislative framework continues to evolve as Michigan works to fully comply with both the Rafaeli and Tyler rulings.

Due to the evolving nature of Michigan's surplus fund recovery framework following the Rafaeli decision, the claims process varies by county. However, general guidance includes: 1. Identify the County: Determine which county conducted the tax foreclosure sale of your property. 2. Contact the County Treasurer: Reach out to the county treasurer's office to inquire about surplus funds and the county's specific claims process. Each county may have developed its own procedures in response to the Rafaeli decision. 3. Gather Documentation: - Proof of identity - Proof of ownership at the time of the tax foreclosure (deed, tax records) - Documentation of any recorded interests in the property - Probate documents if claiming as an heir 4. File a Claim: Submit your claim according to the county's procedures. Some counties have developed specific claim forms; others may require a written request. 5. Consider Legal Representation: Given the complexity and evolving nature of the legal landscape, consulting with a Michigan attorney who handles tax foreclosures or real estate matters is strongly recommended. Resources like martindale.com can help you find qualified local counsel. 6. For Mortgage Foreclosure Surplus: Contact the circuit court clerk in the county where the foreclosure occurred. Surplus from mortgage foreclosures is held by the court under MCL 600.3135. Due to the pending nature of cases across all 83 Michigan counties, the process may involve litigation. An attorney can advise whether a lawsuit or administrative claim is the appropriate path in your specific situation.

Critical deadlines for surplus fund recovery in Michigan: - Six-Year Statute of Limitations: There is a six-year statute of limitations for constitutional taking claims in Michigan. This means some tax sales dating as far back as 2008 could potentially still be subject to surplus recovery claims, depending on when the cause of action accrued. - One-Year Abandonment Period for Court-Held Funds: Under MCL 567.234 (Section 14), property held by a court or governmental agency that remains unclaimed for more than one year after becoming payable or distributable is presumed abandoned. This creates urgency for mortgage foreclosure surplus claims. - Three-Month Court Holding Period: Under MCL 600.3135(2), if mortgage foreclosure surplus remains in court for three months without being claimed, the court may invest it at interest for the benefit of the entitled party — but this does not extinguish the right to claim. - Evolving Deadlines: As Michigan develops new statutory procedures for tax foreclosure surplus in response to Rafaeli, new deadlines may be established. Former property owners should monitor legislative developments and consult with local counsel to ensure compliance with any new requirements. Given the relatively short one-year abandonment period for government-held funds, it is imperative that claimants act quickly once they become aware of potential surplus funds.

AuctionBlock.org is a mission-driven company committed to helping former property owners recover surplus funds from tax foreclosure sales for a flat $2,000 fee, paid only upon successful recovery. Michigan's post-Rafaeli landscape is particularly challenging to navigate alone, and our free services can make a meaningful difference. Here is how we assist Michigan residents: - Free Case Evaluation: We can help you determine whether you may have a viable surplus fund claim based on when your property was sold and the specific circumstances of your case. - Research and Investigation: We research county records to identify potential surplus funds from your property's tax foreclosure sale. - Process Guidance: We guide you through the claims process, which varies by county in Michigan, helping you understand what documentation is needed and where to file. - Legal Resource Connections: For cases that require attorney involvement (common in Michigan due to the evolving legal framework), we can connect you with qualified legal resources, including pro bono and low-cost options. - Legislative Monitoring: We stay up to date on Michigan's developing statutory framework for surplus fund recovery and can advise you on any new procedures or deadlines. - Mortgage Foreclosure Surplus: We also help with claims for surplus from mortgage foreclosure sales under MCL 600.3135. The Rafaeli decision was a major victory for property rights in Michigan. Do not let the complexity of the process prevent you from claiming what is rightfully yours. Contact AuctionBlock.org today at auctionblock.org to start your free case evaluation. Our mission is to ensure no one loses their surplus funds to government coffers simply because they did not know how to claim them.