Real Property Notes Blog

New Right of Inspection post-Foreclosure

Michigan’s Foreclosure by Advertisement statute was recently amended to provide a right of inspection to the foreclosure sale purchaser, and a way to shorten the redemption period if the right of inspection is unreasonably refused or if the occupant causes damage to the property.  

The revision to MCLA §600.3240, effective January 10, 2014, provides that after the sale and periodically during the redemption period the purchaser has the right to inspect the interior and exterior of the premises and all ancillary structures.  If the inspection is refused, or if damage to the property is imminent or has occurred, the purchaser may immediately commence eviction proceedings for possession of the property.  If the damage is repaird before the hearing, no judgment shall be entered.  However, if a judgment is entered, the right of redemption “is extinguished and full title to the property vests in the purchaser.”

Damage includes, but is not limited to:

  • Failure to comply with local ordinances regarding maintenance of the property, if the failure is the subject of an enforcement action by the appropriate governmental unit.
  • Boarded up or closed off windows or doors.
  • A smashed, broken off, or unhinged door.
  • Accumulated rubbish, trash, or debris.
  • Stripped plumbing, wiring, siding, or other metals.
  • Missing fixtures, including furnace, water heater, or air conditioning unit.
  • Deterioration below communit standards for public safety and sanitation
  • Conditions that would consitute a health hazard or injury to premises under the Michigan Summary Proceedings Act.

This new section is a subtantial change from prior law, which did not provide adequate redress to a foreclosure sale purchaser when the occupant was trashing the property.  Purchasers should demand an inspection immediately upon completion of the sale to document the condition of the property as of the sale, and should periodically inspect during the redemption period to assure their investment is not being degraded.

This chang may provide a method for non-mortgagee foreclosure sale purchasers, who currently cannot shorten a redemption period by the abandonment process, to shorten a redemption period.

Can an association prohibit sex offenders from residing in the project?

An association recently asked me if it could prohibit a convicted sex offender, who appears on the Michigan Sex Offender Registry, from residing in the condominium premises.  It seems that a twice-convicted sex offender was being paroled and was coming to live with his mother who owned a unit in the condominium premises.  The short answer was “no,” their existing documents did not prohibit a sex offender from residing in the condominium unit.

This begs the question then, can an association provide in its documents that registered sex offenders may not reside in a unit in a condominium project?  More generally, can an association prohibit any convicted felon from residing in a unit?

The answer is not clear.  Felons generally and sex offenders in particular are not a protected class that civil rights acts (federal or state) protect against discrimination.  It is possible that a ban on ownership of a unit by a felon or sex offender would be struck down as a restraint on alienation.  However, a ban on occupancy may be upheld.  A typical set of condominium documents ban certain types of occupancy regularly:  no pet rules, leasing restrictions, prohibitions on activity that becomes a nuisance or annoyance, and so on.  

The Sex Offenders Registration Act, Act 295 of 1994, states that “[t]he legislature has determined that a person who has been convicted of committing an offense covered by this act poses a potential serious menace and danger to the health, safety, morals, and welfare of the people, and particularly the children, of this state. The registration requirements of this act are intended to provide law enforcement and the people of this state with an appropriate, comprehensive, and effective means to monitor those persons who pose such a potential danger.  However, the statute also provides that disclosure of confidential reports regarding the registered person is both a misdemeanor and gives the registered person a civil cause of action.

An association has no duty to regularly monitor the Registry, nor does it have any duty to disclose the residence of a sex offender within the community if it becomes aware of one, although an association can disclose if it wishes.  Should an association wish to disclose, it should refrain from revealing either the name of the sex offender or the owner of the unit, or the address or location where the sex offender lives, to avoid possibly liability as outlined above.  

The law here is unclear and is evolving; an association should consult with competent counsel before making a decision about whether or not to disclose the presence of a sex offender.

New audit requirements for condominiums

On October 15, 2013, Governor Snyder signed Public Act 134 of 2013, which amends the MI Condominium Act.  The act takes immediate effect, but the effective date of the Act was January 14, 2014.

The new provision requires that, for associations with annual revenues greater than $20,000 per year, the association’s books, records, and financial statements must be independently audited or reviewed on an annual basis by a certified public accountant.  The review or audit must be in accordance with standards issued by the American Institute of Certified Public Accountants.  

Associations with gross revenues less than $20,000 per year need not have an annual review to comply with the Act, but some condominium documents require an annual review or audit notwithstanding the threshold set by the Act; please review your condominium documents to see if you are obligated to have a review regardless of the threshold set by the Act.

An association may opt out of the review or audit by the affirmative vote of a majority of its members, either at a meeting of the association or (if the association’s documents permit) by action taken without a meeting.  The association must opt out on an annual basis; opting out is not permanent.

The effective date of January 14, 2014, gives any association that wants to opt out a window of opportunity to either call a special meeting of members or to comply with the “action without a meeting” provisions of their documents.  Otherwise, for any fiscal year that ends after January 14, 2014, an association must comply with the Act and have an audit or review by a Certified Public Accountant.

Here is a copy of the new Act.

Steve

© Steve Sowell 2018