News Story

Litigants Ask Supreme Court to Review County Land Bank Cherry-Picking Prime Property

Lawsuit wants to prevent government land bank from cutting in front of private investors

Some private real estate investors have asked the Michigan Supreme Court to review their case against the Kent County Land Bank, the Kent County treasurer, Kent County and the City of Grand Rapids after the Michigan Appeals Court rejected their claims involving tax-foreclosed property. They had argued they were deprived of the ability to purchase properties at a public auction because the land bank, a government agency, was able to cherry-pick and purchase them first, for the minimum bid.

Judges Douglas Shapiro and Cynthia Stephens of the Michigan Court of Appeals wrote the 20-page opinion, affirming a trial court’s order granting summary disposition and denying a motion to set aside quiet-title and foreclosure judgement. Judge William Whitbeck, who seemed to favor the plaintiff’s arguments during oral arguments, grilling the defense on the concept of “sham,” resigned several weeks before the opinion was issued. Whitbeck was appointed to the appeals court in 1997 by Gov. John Engler. Shapiro and Stephens were appointees of Gov. Jennifer Granholm.

The judges said that if they were to side with the plaintiffs, they would have had to read language into the statutes that wasn’t there.

“Thus, once Kent County purchased the tax-foreclosed properties from (the) Kent County Treasurer pursuant to MCL 211.78, there was no requirement that its later sale of those properties be by public auction,” stated the opinion.

Ronald VanderVeen, the plaintiffs’ attorney, said, “What the appeals court is saying, is you can do what was done here, as long as you set up a straw person and route the sales through there,”

In the case of tax-foreclosed property in Grand Rapids, the Kent County Land Bank gave the city money to purchase the properties from the Kent County Treasurer. The city then conveyed the properties back to the land bank.

“The transfer process is spelled out in the statute and we believe the court missed the interpretation in the statute, making the land bank section meaningless. The statute says the treasurer can’t transfer property to the land bank until after it goes through the sale and transfer process in the tax sale,” said VanderVeen. VanderVeen says the transfer is similar to forbidding your teenager from driving to a particular city. The teen, then drives to another city and leaves from there.

In practice, the Kent County Land Bank deems properties to be “blighted,” and takes possession of them by skipping ahead of private buyers at an auction.

The case involves the sale of several hundred properties for the minimum bid amount to the Kent County Land Bank between 2012 and 2013. The investors claim that not only were they deprived of purchasing the property fairly and as required by law, but that the sale cheated county taxpayers.

“I am a former Byron Township supervisor and a level 2 assessor. What concerns me the most is that the KCLB takes taxpayers' money away from the general fund of the county,” said Dan Hibma, one of the plaintiffs. “This diversion amounts to millions less dollars going to the general fund while at the same time county government, really all governments, are always asking for more taxes. It isn't right. And, we're going to see if the courts agree or disagree with what the KCLB is doing.”

VanderVeen says it could take one to two years to get a final decision from the Michigan Supreme Court, if it decides to consider the case.  In the meantime, Kent County is racking up legal bills to defend itself. Between December 2012 and September 2014, land bank litigation has cost the county $128,602, according to the county’s corporate counsel.

Two of the county’s commissioners responded to a request asking whether defending the land bank has been worth it to the county, which has a fraction of the tax foreclosures seen in some counties on the east side of the state.

“Counties have frivolous lawsuits brought against them from time to time. This is an example of a frivolous lawsuit,” said Commissioner Stan Ponstein.

Commissioner Mandy Bolter has a different view.

“I am opposed to government programs that directly compete with the free market,” Bolter said. “I know of many people who provide for their families through the real estate market – they shouldn't have to compete with the government to make a living. In my experience, tax dollars should not go toward anything that could be provided more efficiently and effectively by the private sector – saving tax dollars. There are great reasons to have a land bank in Kent county but I think this lawsuit serves as a perfect example of possible areas within the structure of our land bank that may need to be revisited or reconsidered – finding a solution or structure that could work for everyone.”


A past video report on the Kent County Land Bank:

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.