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Michigan

Local governments can't keep extra cash in tax foreclosures

It's a sweeping decision that could lead to waves of payments to former owners.

Credit: AP

FILE - This undated file photo shows a home in Southfield, Mich., that was foreclosed and sold for $24,500 after the owner failed to pay taxes. A lawyer is warning that local governments in Michigan could face a financial calamity if forced to repay surplus cash from the sale of tax-foreclosed properties. The Michigan Supreme Court heard arguments Thursday, Nov. 7, 2019, over a state law that allows treasurers to keep money left over after overdue property taxes are paid from a sale. Christina Martin, an attorney for two people in Oakland County, called it "stealing." (AP Photo/Ed White File)

DETROIT — The Michigan Supreme Court says local governments can't keep surplus cash from the sale of tax-foreclosed properties.

It's a sweeping decision that could lead to waves of payments to former owners.

State law allowed county treasurers to keep money left over after overdue taxes finally are paid from a property sale.

The Supreme Court said the practice is illegal under the Michigan Constitution. The case centered on two sales in Oakland County. In one deal, a man owed $6,000 in back taxes, but the county also kept a $76,000 surplus from the land sale.

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