Bill Would Let Land Banks Buy Property Before The Public

Legislation recently introduced in the Senate would specify that land banks can purchase delinquent and abandoned property before free market buyers get a chance at public auction.

The measure, Senate Bill 640, is sponsored by Sen. Darwin Booher, R-Evart. It was introduced Oct. 23, which was about the same time that the House Local Government Committee was preparing to hold hearings on bills aimed at having the opposite effect.

When contacted about the conflicting positions, a spokesman in Sen. Booher's office said language in Senate Bill 640 to allow land banks to purchase delinquent property before public auction will be taken out, but no timeline was given for the changes.

"We'll watch with interest to see what changes actually take place with the legislation," said Jack McHugh, senior legislative analyst with Mackinac Center for Public Policy. "But one can't help wondering if the original version is one more indication of the growing land bank empire's skill at political manipulation, In addition to scaling back that empire, lawmakers should keep a sharp and skeptical eye on these slick operators."

Under Michigan statute, land banks aren't supposed to purchase such property until after market buyers get their chance at tax auctions. This prohibition indicates that the intent of the law was to limit land bank purchases to the less desirable parcels and buildings that the free market rejects. But a way has been found to circumvent that intent.

Local governments are allowed to purchase such properties before tax auctions. In the Grand Rapids area, local governments have been buying properties for the Kent County Land Bank. They make the purchase, then immediately sell the property to the land bank at cost. By doing this, the Kent County Land Bank has been able to buy real estate that otherwise would have sold to private parties.

As Senate Bill 640 is currently drafted, it would let the land banks buy the properties without even having to resort to circumvention of the law’s intent. Senate Bill 640 has been assigned to the Senate Banking and Finance Financial Institutions Committee, which is chaired by Sen. Booher.