If you own real property in which you have substantial equity, never let the government sell it for unpaid taxes.

The property can go for a fraction of what it is worth, and you may have little recourse.

That is the lesson of the U.S. Supreme Court’s decision in Pung v Isabella County.1

Background

Scott Pung bought a three-bedroom ranch house on a little over half an acre in Union Township, Michigan, in 1991.

Michigan taxes a principal residence at a lower rate than a second home, and the Pung family claimed the principal residence exemption and paid its tax bills. Scott Pung died in 2004, and the home remained in his estate while family members continued to live there.2

In 2010, the Union Township tax assessor decided the exemption did not apply and denied it for 2007 through 2011. The Pungs took the dispute to the Michigan Tax Tribunal and won.

The assessor imposed the tax again. The Pungs litigated a second time, this time in the state courts, and won again.3

The disputed amount, including penalties and interest, came to $2,241.93. Isabella County began foreclosure proceedings anyway.

A state trial court blocked the foreclosure, but the Michigan Court of Appeals allowed it to proceed. The county followed the procedures in the Michigan General Property Tax Act when it:4

gave the family a redemption period,

provided public notice of the sale,

obtained a judgment of foreclosure from a state court, and

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