Attorney General Says a Municipality May Not Refuse Utility Services to Tax-Foreclosed Property Based on Unpaid Charges

A municipality may not condition providing utility services to tax-foreclosed property by demanding that a buyer of tax-foreclosed property pay delinquent utility-service charges that the former owners of the foreclosed property incurred. Attorney General Opinion, No. 7258 (5/6/11). The Attorney General issued that ruling in early May 2011. Here is the Attorney General’s reasoning.

Under the General Property Tax Act, a judgment of foreclosure extinguishes all liens and interests related to unpaid utility-service charges against the property. A tax foreclosure cancels any liens against property for water or sewage services imposed under the Municipal Water Liens Act (1939 Public Act 178) for these reasons:

1. Section 5 of Public Act 178 expressly provides that liens under the Act are lower priority from tax liens on the property;
2. MCL 211.78k(5) cancels the liens against foreclosed property; and
3. MCL 211.78m(13) cancels any subsequent lien due on property that may arise during the year of the foreclosure of the property.

So although § 6 of Public Act 178 authorizes a municipality to enforce its liens by discontinuing service, once the tax liens are foreclosed no liens remain against the property that can be enforced by refusing to provide service. As such, Public Act 178 does not allow a municipality to refuse utility services to tax foreclosed property based on unpaid charges incurred by former owners.

However, the Attorney General added, a municipality may recover those charges by including the delinquent charges in the cost of the property at the time it is offered for sale under the General Property Tax Act, or by instituting other lawful action against the former owners.

If you have questions about the Open Meetings Act in general or its provisions on notice and closed sessions, feel free to contact Anne Seurynck (616.726.2240) of the Foster Swift Municipal Practice Group.

• Read full June 2011 Municipal Law News