Most people who own a home use it as their personal residence. This entitles them to a “homestead exemption” that results in a lower property tax bill. However, in the recently depressed real estate market, many homeowners have either been forced to leave their homes vacant while they try to sell them or have sold their homes on land contract. In those cases, it was often unclear whether the homeowner would forfeit the “homestead exemption” and be forced to pay higher property taxes.
On May 21, 2012, the Michigan Legislature enacted a new law to clarify who qualifies for the homestead exemption and how. The new law makes clear that if the owner has the homestead exemption, he may retain it, for not more than 3 years, after he quits living at the property. Also, if an owner who sold the property on land contract (or a bank who held the mortgage) has taken back ownership as a result of foreclosure, he may retain an existing homestead exemption.
In both cases, the exemption continues only if the property is NOT:
- for sale
- used for any business or commercial purpose.
Where to Start
In order to retain the exemption, the owner must file a Conditional Rescission of Principal Residence Exemption form by May 1. The owner also must verify, before December 31st of each year, that the property is still eligible for the homestead exemption (by verifying that it continues to meet the four requirements listed above). If that verification is not received by the assessor by December 31st, or if the assessor believes that the four conditions are no longer met, then the homestead exemption is lost and the owner will be billed for the full property taxes. These new rules could result in a significant property tax savings if the owner can continue to qualify for the homestead exemption. However, the rules and the deadlines are very strict, and must be adhered to precisely.
In reality, a property MUST be for sale in order to qualify for a homestead exemption; but it CANNOT be occupied, leased or used for a business purpose. We apologize for any confusion this may have caused!