City of Jackson Property Inspection Fee Upheld
The City of Jackson, like so many other cities, charges rental property owners a property inspection fee to ensure it is safe and in compliance with building codes. Recently, a rental company challenged this property inspection fee in court arguing that it constituted a tax. If the fee was really a tax, it violated the Michigan Constitution because it was not voted on and approved by a majority of the electors of the City.
After a review of the facts, the Michigan Court of Appeals issued an order holding that the property inspection fee was not a tax but simply a regulatory fee. The court briefly reasoned that because this fee serves the regulatory purpose of funding measures to ensure safe, sanitary, and habitable rental housing, it is not a tax. The court also reviewed the documents provided by the parties and determined that the amount of the fee was reasonable because the fees actually received by the city were less than the costs for the inspection program.
One of the three justices did disagree with this decision. In essence, his position was that there had not been a sufficient showing that the amount of the inspection charge was reasonable and proportionate. He believed the Plaintiff is entitled to a full hearing on the merits of the case.
This decision means that cities can continue to charge inspection fees in order to cover their costs. A decision in the alternative would have been a significant burden on Michigan cities – it would have required approval of the voters to charge a new tax for the inspections. To get voters to pass such a measure in today’s financial climate would be nearly impossible.