Michigan Surplus Proceeds: The $8.41 Case That Beat Tyler by 3 Years

Michigan runs a county foreclosure process, not a lien-certificate auction — property becomes tax-forfeited after roughly three years delinquent, and if it's not redeemed by the March 31 deadline in year three, the county forecloses and auctions it publicly. The case that reshaped how Michigan handles the surplus from that auction started with an unpaid debt of exactly $8.41.

Rafaeli v. Oakland County: smaller than Tyler, and three years earlier

Uri Rafaeli owed $8.41 in unpaid 2011 property taxes on a Southfield rental property — a shortfall from a corrected tax calculation, not unpaid taxes in the ordinary sense. By the time interest, penalties, and fees accrued, the debt reached $285.81. Oakland County foreclosed, sold the property at public auction for $24,500, and under Michigan law at the time kept the entire difference — over $24,000 — for itself. In July 2020, the Michigan Supreme Court ruled unanimously that this violated the state constitution's takings clause. This predates Tyler v. Hennepin County, the U.S. Supreme Court case that made the same principle federal law nationwide, by almost three years — Michigan didn't need Tyler to tell it this was unconstitutional.

The fix: Form 5743, filed by July 1

The Michigan Legislature amended the General Property Tax Act in December 2020 to build a real claim process. Anyone with an interest in the foreclosed property — the former owner, a lienholder — can file Form 5743 with the foreclosing governmental unit (usually the county treasurer) claiming surplus proceeds from the auction. The deadline is firm: the form has to be filed by July 1 immediately following the foreclosure, which in practice gives claimants a window of a few months from when the auction typically happens in the fall to that following July.

If your property was foreclosed before 2020: check your specific county

Because Rafaeli was decided on constitutional grounds, it opened the door to claims for foreclosures that happened well before the 2020 ruling — not just going forward. Several counties, including Oakland County itself (where the original case arose), set up settlement processes to resolve this backward-looking liability. Oakland County has since closed its settlement: no further claims from that specific program are being accepted. That doesn't necessarily apply statewide — if you had a Michigan property foreclosed years ago and never filed a claim, check with that specific county's treasurer rather than assuming the door is shut everywhere, since each county handled its pre-2020 exposure separately.

For investors

Michigan's post-Rafaeli process means every county auction now carries real surplus exposure if a property sells well above the tax debt — the July 1 deadline is short enough that most valid claims get resolved within roughly a year of the sale, which is faster than states like Georgia (five years) or California (filed within one year, but paid out no sooner than that). If you're bidding on Michigan tax-foreclosed property with obvious equity above the debt, assume the former owner or a lienholder is likely to file, and price the deal on your bid amount, not on any expectation of capturing the spread yourself.

This article is general information, not financial or legal advice. Confirm current forms, deadlines, and county-specific settlement status with the relevant Michigan county treasurer. See our broader guide on surplus funds after a tax sale and the Michigan state page for foreclosure mechanics.