Christine MacDonald

The Detroit News

The American Civil Liberties Union of Michigan and the NAACP Legal and Education Fund on Wednesday sued to stop the Wayne County Treasurer from auctioning hundreds of owner-occupied homes for unpaid taxes this fall, arguing the foreclosures were illegal.

The county’s tax sale violates the Federal Fair Housing Act by disproportionately foreclosing on black homeowners, a process driven by Detroit’s inflated city tax assessments, said ACLU Legal Director Michael Steinberg. The suit, filed Wednesday morning in Wayne County Circuit Court, names Wayne County Treasurer Eric Sabree, the county and the city of Detroit as defendants.

“Wayne County and Detroit are creating a human catastrophe by tossing thousands of homeowners into the streets for inability to pay unlawfully assessed taxes,” Steinberg said in a press release. “This short-sighted practice not only violates federal law, it destabilizes families, destroys neighborhoods and undermines the economic recovery of the region.”

The city taxed the home of one ACLU client at risk of foreclosure as if it was worth $40,000, while a private appraisal paid by the ACLU pegged its value at $9,000.

The controversial auction has drawn critics for years, who say residents are losing properties because of tax bills that bear little relation to market value. The sale has attracted hundreds of out-of-state speculators and local investors who buy for as little as $500, and many don’t pay tax bills either.

The treasurer has processed more than 140,000 foreclosures countywide since 2002, according to Loveland Technologies, a company that studies tax foreclosure.

The ACLU is asking the court to halt the sale of all properties that are owner occupied, an estimated 1,530, and stop future foreclosures until the city can properly assess them, according to the lawsuit.

A total of 5,600 homes headed to the tax sale in September are occupied, which includes renters.

The plaintiffs, seven homeowners and four neighborhood associations represented by ACLU attorneys, are also asking the lawsuit be designated as a class action for all homeowners affected.

Sabree said he is required by law to auction off properties after three years of unpaid taxes. He said foreclosures are down by more than 46 percent this year to about 15,000 county wide because of efforts to get owners on payment plans.

“This complaint filed by the ACLU has nothing to do with the Wayne County Treasurer’s Office,” Sabree said in a statement. “It is an attempt to ignore state law and prevent the property tax foreclosure auction from taking place.”

City officials said assessments in 2013 were supported by sales data and that they’ve worked with the county to reduce foreclosures.

“This has been one of the mayor’s highest priorities,” city Treasurer David Szymanski said in a statement. “We successfully sought legislation to reduce penalties and interest and create workable payment plans that have helped to keep more than 27,000 homeowners in their homes in just the past year.”

Detroit is in the midst of a city-wide reassessment — the first in decades — and has lowered assessments between 5 percent to 20 percent in some neighborhoods for the last three years.

But some residents say it hasn’t been enough. Walter Hicks, a 57-year-old disabled Detroiter and one of the plaintiffs, is at risk of foreclosure next year with more than $4,500 in tax debt dating to 2013.

The city valued his west side brick home at $40,000 in 2013, more than four times what the ACLU says it was worth at that time. The home is on the 11700 block of Robson that has several vacant homes. Hicks bought it in 2012 from the tax auction for $2,700.

“It’s preposterous,” said Hicks, who has to pay the county $339 a month under a payment plan. “All I am worried about is paying that tax bill that I will never get caught up on.”

An investigation by The Detroit News in 2013 concluded that Detroit was over-assessing homes by an average of 65 percent, according to a review of state tax appeals. The series prompted state regulators to overhaul Detroit’s Assessment Division.

Steinberg said he believes “a huge percentage” of people on county payment plans are defaulting because they can’t afford them.

The lawsuit also argues that the Detroit Citizen Board of Review’s process to grant poverty exemptions has violated homeowners’ due process rights by not giving them a reason for their denial. And some ACLU clients didn’t receive a response at all, according to the lawsuit.

Poverty exemptions can lower or eliminate tax bills if owners qualify.

Detroit Corporation Counsel Melvin Butch Hollowell called the lawsuit “meritless.”

“The city is confident that not only is the ACLU’s claim fatally flawed as any potential claim was discharged in bankruptcy, but it is also recklessly irresponsible,” Hollowell said in a statement. “It would violate compliance with the Plan of Adjustment, indefinitely prolong state oversight of city operations and threaten basic city services to all Detroiters.”

The ACLU, and NAACP Legal and Education Fund were joined by lawyers from the Washington, D.C.-based Covington & Burling LLP in the lawsuit filing.

cmacdonald@detroitnews.com