Land bank legislation
In 2003, the State of Michigan passed the Land Bank Fast Track Act, which authorized land banks to strengthen and revitalize the economy by assembling and using public property to promote economic growth and to clear titles in an expedited manner.
There are more than 40 land banks operating in Michigan. Each land bank uses the unique economic tools provided by the legislation differently in their respective counties. The KCLBA, through highly effective public-private partnerships, has developed the ability to quickly resell and redevelop the properties it acquires.
The KCLBA obtains properties through numerous channels including donations from property owners or banks, and it works closely with local units of government to review available tax-foreclosed properties for purchase.
The state also passed legislation to help land banks cover costs including those associated with clearing, quieting, or defending titles to property held by the authority.
County tax foreclosure process
When an owner doesn’t pay property taxes for three years, the county treasurer forecloses on the property. This differs from a lending institution’s foreclosure on a property for unpaid mortgage payments.
Once the county has foreclosed on a property, the state can purchase it at fair market value. Should the state pass, the local unit of government (e.g., city, township, village) has the opportunity to purchase the property for a public purpose at the cost of unpaid taxes. Public purpose includes working with a land bank to clear the title, eliminating blight, stabilizing property values, preserving neighborhood character, and creating economic development opportunities.
“The legislature finds that there exists in this state a continuing need to strengthen and revitalize the economy of the state and local units of government… It is declared to be a valid public purpose for a land bank fast track authority created under this act to acquire, assemble, dispose of, and quiet title to property under this act. It is further declared to be a valid public purpose for a land bank fast track authority created under this act to provide for the financing of the acquisition, assembly, disposition, and quieting of title to property, and for a land bank fast track authority to exercise other powers granted to a land bank fast track authority under this act. The legislature finds a land bank fast track authority created under this act and powers conferred by this act constitute a necessary program and serve a necessary purpose.”
Land Bank Fast Track Act Act 258 of 2003
If the local unit of government does not purchase the property, the county has the option to buy it for the cost of unpaid taxes, which is the process the KCLBA used in 2012. If the state, local, and county governments do not buy the property, then it goes to a cash-only auction that is open to the public.
Once the KCLBA acquires a property, it quickly clears title, cleans the property up, and lists it on the Multiple Listing Service (MLS). MLS listings are available to the general public, and anyone is welcome to submit a purchase offer.
In order to ensure properties will be redeveloped, the KCLBA has created a set of requirements that potential buyers must meet. Interested buyers must submit construction specifications, proof of financing, and proof of the ability to complete the renovations with their offers.
The KCLBA then reviews all offers and accepts those that will best return the property to a productive use.