The following opinion is presented on-line for informational use only and does not replace the official version. (Mich Dept of Attorney General Web Site - www.ag.state.mi.us)



STATE OF MICHIGAN

JENNIFER M. GRANHOLM, ATTORNEY GENERAL

 

ASSESSMENTS:

MUNICIPAL CORPORATIONS:

TAX COLLECTION:

TAX LIENS:

Effect of tax foreclosure proceedings on liens for special assessments

Liens for future installments of special assessments levied by townships are not extinguished by tax foreclosure proceedings under the General Property Tax Act.

Opinion No. 7110

June 17, 2002


Honorable Philip Hoffman
State Senator
The Capitol
Lansing, MI 48913

You have asked whether liens for future installments of special assessments levied by a township are extinguished by tax foreclosure proceedings under the General Property Tax Act.

The General Property Tax Act (GPTA), 1893 PA 206, MCL 211.1 et seq, was enacted, in part, to provide for the collection of taxes by making taxes a lien on property and to provide for the sale or forfeiture and conveyance of property that is delinquent for taxes.

Through 1999 PA 123, the Legislature added sections 78-78p to the GPTA. These amendments significantly changed the real property tax foreclosure process that had prevailed in this state for over a century, so as to facilitate the prompt return of tax delinquent lands to productive economic use. House Legislative Analysis, HB 4489, July 23, 1999. Before the 1999 amendments, delinquent tax liens were offered for sale to private persons at public sales conducted pursuant to circuit court judgments obtained by the several counties in the name of the State Treasurer.1 If no bids were received, the tax liens were "bid off" to the State of Michigan. If no person redeemed the lands, the tax lien purchaser was entitled to receive from the State Treasurer a deed conveying the lands. For lands bid off to the state and not redeemed, the state received a State Treasurerís deed memorializing its acquisition of title pursuant to the terms of the circuit court judgment. This process could take as long as six years to complete, thus delaying the return of lands to the tax rolls. Id.

The 1999 amendments to the GPTA now require that judicial proceedings to effectuate a tax foreclosure be brought by either the state or the county. Section 78(6) of the GPTA defines the term "foreclosing governmental unit" to mean (1) the "treasurer of a county," or (2) the "state" if a county has opted to have the state effectuate the foreclosure. The 1999 amendments also eliminated private persons from purchasing tax liens in the tax foreclosure process. Under the new process, there is no sale of delinquent tax liens. Rather, delinquent tax liens are forfeited to the county treasurer in March of the second year of the tax delinquency (section 78g), and the property is foreclosed at a circuit court hearing held at the end of the second year of delinquency, followed by a 21-day redemption period after the entry of judgment. Section 78k.

Section 78k(5)(c), which addresses the judgment to be entered by the circuit court, provides that:

The circuit court shall enter judgment on a petition for foreclosure filed under section 78h . . . . All redemption rights to the property expire 21 days after the circuit court enters a judgment foreclosing the property as requested in the petition for foreclosure. The circuit courtís judgment shall specify all of the following:

* * *

(c) That all liens against the property. . . except future installments of special assessments and liens recorded by this state or the foreclosing governmental unit pursuant to the natural resources and environmental protection act, 1994 PA 451, MCL 324.101 to 324.90106, are extinguished, if all forfeited delinquent taxes, interest, penalties, and fees are not paid within 21 days after entry of the judgment. [Emphasis added.]

In construing these subsections, a review of the history of the GPTA's provisions affecting treatment of delinquent tax liens, particularly those for special assessments under the previous tax foreclosure process, is instructive. In the midst of the Great Depression, the Legislature imposed a six-year moratorium on tax sales. In Baker v State Land Office Bd, 294 Mich 587, 592-594; 293 NW 763 (1940), the prevailing conditions that prompted the moratorium are described in detail. There, the Court sustained the cancellation of all existing liens and encumbrances against arguments that the statute destroyed vested rights of governmental units and of persons holding bonds issued to pay for governmental improvements. The Court observed "that such (bond) purchasers can be assumed to have purchased with knowledge that the lien upon the property securing such taxes and assessments might be displaced." Baker, 294 Mich at 599. Similar challenges by holders of bonds for which the proceeds of special assessments were pledged also failed for the same reasons. Municipal Investors Ass'n v City of Birmingham, 298 Mich 314, 323; 299 NW 90 (1941).

As part of a substantial revision of the tax foreclosure procedures, 1941 PA 234 amended section 67 of the GPTA to provide that title to lands bid in to the state shall become absolute, and all special assessment and liens were cancelled. However, through 1984 PA 103, which amended 67a, the Legislature extended protection for certain liens for past and future installments of special assessments. Amended section 67a provides, in part, that:

(3) Special assessments which are levied against property and which are pledged for the repayment of bonds or notes issued by a local unit to finance public improvements for which the special assessments are authorized shall be considered to be deferred at the time title becomes absolute in the state and until such time as the property is sold by the state. If the property is sold by the state, all unpaid special assessments or special assessment installments due and payable at the time title becomes absolute in the state which are pledged for the repayment of bonds or notes issued by a local unit to finance public improvements for which the special assessments were authorized, plus any interest or penalties on those unpaid special assessments or special assessment installments due and payable at the time title becomes absolute in the state, shall be due and payable as part of the purchase price of the property. . . .

Following enactment of 1984 PA 103, failure to redeem lands bid to the state resulted in the cancellation of all taxes and special assessments except those special assessments levied against property for the repayment of bonds and notes issued by local governmental units2 to finance public improvements. Past installments were deferred and collected by the state upon the sale of the property. Future installments remained valid.

As part of the 1999 amendments to the GPTA, section 78k(5)(c) was added by 1999 PA 123. This section does not preserve liens for delinquent special assessment installments imposed on the property prior to the entry of a foreclosure judgment. Under these amendatory provisions, similar to those in effect at the time of the Baker decision, supra, liens for special assessments held by a township, as well as any other local governmental unit, are canceled. As described in Baker, tax foreclosed lands are made free of liens for delinquent special assessments. However, special assessment installments that become due and payable after acquisition of title by the state or county are not canceled. Foreclosure does not cancel "future installments of special assessments and liens recorded by this state or the foreclosing governmental unit pursuant to the natural resources and environmental protection act." Section 78k(5)(c). The language "recorded by this state or the foreclosing governmental unit" amends its last antecedent, i.e., the word "liens" and not the words "special assessments." "Qualifying words and phrases in a statute refer solely to the last antecedent in which no contrary intention appears." Weems v Chrysler Corp, 448 Mich 679, 700; 533 NW2d 287 (1995). See, 2A Sutherland Statutory Construction (6th ed), ß 47.33, pp 369-371.

"Liens" and notices of liens are recorded in the office of the register of deeds for the county in which the lands are located. "Special assessments" are not recorded. Liens may only be accepted for recording where there is a statute permitting such recordation. Nelson v Scofield, 219 Mich 595, 597; 189 NW 185 (1922). Research discloses no statute authorizing the recording of liens for special assessments levied by local governmental units. Therefore, the legislative intent evinced by the statutory language is that two categories of liens are not extinguished by foreclosure: 1) future installments of special assessments, and 2) liens recorded by the state or foreclosing governmental unit pursuant to the natural resources and environmental protection act.

Accordingly, special assessment installments coming due after acquisition of title by the state or county are not canceled by tax foreclosure proceedings. While either the state or the county in which the land is located may serve as the foreclosing governmental unit, there is no legislative intent to limit special assessments to those levied by a county or the state. Accordingly, there is no basis to conclude that the Legislature intended to protect only those "local" special assessments imposed by a county.

Section 67a, as amended by 1984 PA 103, protected only special assessments that were levied against property and that were pledged for the repayment of bonds or notes issued by local governmental units to finance public improvements. Section 67a, however, is repealed by 1999 PA 123, effective December 31, 2003. No such limitation appears in new section 78k of the GPTA. Thus, special assessments protected under section 78k include unpaid future installments of special assessments levied by local governmental units.

It is my opinion, therefore, that liens for future installments of special assessments levied by townships are not extinguished by tax foreclosure proceedings under the General Property Tax Act.

 

JENNIFER M. GRANHOLM
Attorney General

1 For sales conducted before 1966, the judgments were obtained in the name of the Auditor General.

2"Local units," as the term was used in the former process, would include all cities, villages, townships, counties, or other public authorities authorized to undertake public improvements and levy special assessments pledged for the repayment of securities issued to defray the cost of such public improvements. See, e.g., the Revenue Bond Act of 1933, 1933 PA 94, MCL 141.101 et seq.