MSC grants leave for two real estate cases

The Michigan Supreme Court granted leave to hear two controversial real estate cases on Wednesday.

The first is Residential Funding Co. v. Saurman, a case in which the Court of Appeals said the Mortgage Electronic Registration Systems (MERS) didn’t have authority to foreclose or evict the residents whose homes are in foreclosure. (See “COA rules mortgage processor has no authority to forecloseon or evict homeowners” and  “Will MSC sour on ‘Saurman’?”).

In Saurman, MERS, “a mechanism to provide for the faster and lower cost buying and selling of mortgage debt,” began non-judicial foreclosures by advertisement on several homes. The COA said it couldn’t do that because it was not the owner of the debt, someone with an interest in the debt, or a servicing agent of the mortgager.

The other case involved the property taxation of land in development, Toll Northville v. Twp of Northville. (See “Sorry, no refund”).

In Toll Northville, some home developers sought to get a refund of overpaid property taxes. The overpayment was the result of the developers being assessed based on improvements made to the land in development. The assessment was based on a statute that the Michigan Supreme Court later declared unconstitutional.

The developers were originally granted their refunds by the Michigan Tax Tribunal, but the COA reversed, finding the tribunal didn’t have jurisdiction to hear the appeals because they weren’t timely filed in the year of the assessment, even if the assessment may have been correct under the stricken law, which was in effect at that time.

Hearings for both cases have not yet been scheduled.

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Charlevoix to appeal COA decision that prevented reassessment of property taxes after joint owner died

Earlier this month, we posted a story about Charlevoix trying to raise the property taxes on a jointly owned tract of land after one of the joint owners died. The Court of Appeals held that there was no conveyance of the land after James Klooster’s death because of the joint ownership.

Charlevoix now wants to appeal to the decision to the Michigan Supreme Court. From the AP:

CHARLEVOIX, Mich. (AP) — A northern Michigan city is asking the state Supreme Court to take a property tax case that is getting the attention of many other communities.

In December, the Michigan Court of Appeals said it was illegal for Charlevoix to raise the taxable value of a house after the death of a co-owner.

The court said the value could not be uncapped because there was no new transfer of ownership. Charlevoix’s lawyer, Bryan Graham, claims a loophole has been created. Assessors elsewhere are upset, too.

Charlevoix is appealing to the Michigan Supreme Court, and the State Tax Commission will help by paying $10,000 in legal fees.

Nathan Klooster’s (KLOW’-ster’s) mother and disabled sister live in the modest home. He was a joint tenant on the deed when his father died in 2005.

MI COA: Adding a joint owner to home maintains taxable value when original owner dies

ED WHITE, Associated Press Writer

DETROIT (AP) — A dispute over a modest three-bedroom home in northern Michigan could have consequences statewide after an appeals court said the city of Charlevoix illegally raised the property’s taxable value when a co-owner died.

Taxes more than tripled after James Klooster’s death in 2005. Charlevoix had lifted the lid on the value, even though a son was a co-owner and the property didn’t change hands.

"James’ death was not a conveyance. … There was no transfer of ownership, and the taxable value of the property should not have been uncapped," the Michigan Court of Appeals said.

Assessors and local governments up and down Michigan are talking about the Dec. 15 decision. Any court-ordered restriction on raising a property’s taxable value prevents them from collecting more revenue.

Since Michigan voters approved Proposal A in 1994, the taxable value of a home can’t go up much unless there’s a new owner, typically through a sale.

Nathan Klooster, 50, said his father added him to the deed as a joint tenant, or co-owner, in August 2004, five months before his death.

Klooster said his mother, who has health problems, and a disabled sister still live in the house.

"My dad’s goal was he didn’t want to see them put in a home or go anywhere else. We talked about it at great length," said Klooster, who lives nearby in Marion Township.

But Charlevoix claimed the elder Klooster’s death triggered a transfer of ownership, raising the home’s taxable value to $72,300 from $37,802.

"We uncapped it because he was the sole owner of the property," Charlevoix County equalization director Betsy Mason said, referring to Klooster’s son.

Nathan Klooster said taxes have jumped to about $4,000 a year from $1,168. (Part of the increase is due to the lack of a homestead exemption because this is not his principal residence.)

Klooster’s lawyer, Steven Stapleton, said the court ruling "potentially has a bigger ripple" elsewhere in Michigan. Mason disagreed with the result.

"I don’t believe it was the intent of the Legislature to have a loophole for the uncapping process," she said. The consequences "go far beyond this one parcel."

[Ed. note – I don’t believe it was the intent of the Legislature either, because Proposal A was passed by referendum, and not passed by the legislature.]

Charlevoix hasn’t decided whether to appeal to the Michigan Supreme Court.

Grand Rapids lawyer Jeffrey Ammon, who specializes in property-tax law, said the Klooster case "should give comfort to taxpayers."

"Assessors are looking at any transfers, any deeds, any deaths to increase taxes," he said. "I don’t blame them for that. If they’re missing that sort of thing they’re not doing their job."