Michigan Court of Appeals Clarifies Timing for Tax Foreclosure Surplus Proceeds Claims

Client Alert – For Counties and Foreclosing Governmental Units

The Court of Appeals issued a published decision this week that answers a question many counties have been dealing with over the past year: When do surplus proceeds claims actually accrue for purposes of the statute of limitations?

In In re Petition of State Treasurer for Foreclosure for Unpaid Tax, _______ Mich App ______ (2026) (Docket Nos. 376481, 376482, 376653, 376655, 376656), issued on June 18, 2026, the Court of Appeals held that those claims accrue at the time of the tax foreclosure sale—when the property is sold and the surplus is retained—not years later when Rafaeli, LLC v Oakland County was decided in 2020 or when Schafer v Kent County extended that holding retroactively in 2024.

In the case before the Court, the properties were foreclosed and sold in 2014. At that time, former owners could have pursued inverse condemnation claims based on the retention of surplus proceeds. The Court concluded that the elements of those claims were complete at that point, even though the statutory process in MCL 211.78t did not yet exist. Because inverse condemnation claims were subject to a three-year limitations period, those claims were required to be filed in 2017.

The former owners later attempted to recover surplus proceeds through the MCL 211.78t process after Schafer was decided. The trial court allowed those claims to proceed, reasoning that they did not accrue until Schafer confirmed that the statute applied retroactively. The Court of Appeals rejected that approach and reversed.

The Court made two points that frame the issue. First, the right to surplus proceeds was not created by Rafaeli or Schafer. It existed all along as a constitutional right. Second, the 2020 amendments to the GPTA did not restart the clock. They provided a process for pursuing that right, not a new claim.

From there, the Court concluded that if a claim was already time‑barred before December 22, 2020, neither the statute nor later case law brings it back. Schafer itself makes that point.

For counties, this decision should help in evaluating claims involving older foreclosure sales. Many of the claims filed over the past year relate to sales that occurred well before 2020. If those claims were not pursued within the applicable limitations period when they accrued, this decision supports a statute‑of‑limitations defense.

If your county is dealing with surplus proceeds claims, particularly those tied to older foreclosure sales, Foster Swift’s municipal team is ready to assist. 

• Laura J. Genovich...616.726.2238...lgenovich@fosterswift.com
• Keith T. Brown...616.726.2211...kbrown@fosterswift.com