Real Property Notes Blog
Mortgagee may apply association insurance proceeds to pay down loan rather than repair condominium unit
In Woodland Condominium Homeowners Assn v Fannie Mae, an unpublished Michigan Court of Appeals opinion, a condominium unit was destroyed by fire. The condominium association retained a contractor who estimated the cost of repairs at $141,000. The associatino submitted a claim under the association’s master policy, which issued a check in the amount of $87,900 payable to the association and the mortgagee jointly. The association’s managing agent endorsed the check and sent it to Fannie Mae’s servicer, who deposited the check in an escrow account. Although the servicer subsequently issued a check for a portion of the proceeds to the unit owner, the association, and a contractor retained by the association, the letter containing the check was later returned to the servicer as undeliverable. Fannie Mae then decided to apply the entire proceeds to pay down the loan balance, which was approximately $106,500. The association sued, claiming that the insurance funds should have been used to rebuild the property.
The mortgage provided that the mortgagee could apply insurance proceeds to pay down the mortgage unless the parties agreed otherwise in writing. The condominium documents contained a provision that “Nothing contained in the Condominium Documents shall be construed to give a Condominium Unit Owner, or any other party, priority over any rights of first mortgagees of Condominium Units pursuant to their mortgages in the case of a distribution to Condominium Unit Owners of insurance proceeds or condemnation awards for losses to or a taking of Condominium Units.” Because the condominium documents deferred to the mortgage document, the mortgagee was within its rights to use the insurance proceeds to pay down the loan balance rather than use the insurance proceeds to rebuild the property.
A different result might have occurred had the managing agent not endorsed the check and sent it to the servicer, or at least the association would have had leverage to obtain a written agreement to apply the insurance proceeds to repair of the unit.
Landlord not liable for double security deposit withheld
In Tree City Properties, LLC v Perkey, a published Michigan Court of Appeals opinion, the landlord sent the tenant an itemized list of damages. The tenant disputed the damages. The landlord filed suit against the tenant. At trial, some of the landlord’s claims were denied, and the trial court granted the tenant a judgment for twice the amount of the security deposit withheld for the denied items. The landlord appealed.
Holding that the issue as one of first impression in Michigan, the Court of Appeals reversed the trial court, holding that a landlord who has complied with all of the requirements of the Landlord-Tenant Relationships Act cannot be held liable for twice the amount of the deposit withheld simply because the landlord loses on the claim.
The Landlord-Tenant Relationships Act provides that, if the tenant gives the landlord a forwarding address in writing within 4 days of vacating, the landlord must send the tenant an itemized list of damages within 30 days of vacating. Under MCL 554.613(1), if the tenant disputes any of the claimed damages, the landlord must file suit against the tenant within 45 days of vacating. MCL 554.613(2) provides that, if a landlord fails to comply with this section, the landlord “is liable to the tenant for double the amount of the security deposit retained.”
The court held that, if the landlord has complied with (1) by filing suit within the 45 days, the landlord is not liable for twice the amount of the security deposit simply because the landlord’s claim for damages was not sustained in the trial court.
No recovery against condominium for open and obvious condition
In Haggart v Hills of Regency I Condo. Assn., an unpublished Michigan Court of appeals opinion, the Plaintiff slipped and fell on the driveway of a condominium unit in winter. She sued the association for injuries sustained. The trial court granted the association and its managing agent summary disposition, and the Court of Appeals affirmed.
A landowner, such as a condominium association, has a duty to use reasonable care to protect invitees from unreasonable risk of harm by dangerous conditions on his land, but the owner has no duty to warn of conditions which are open and obvious. Whether a condition is open and obvious is an objective standard. However, a landowner may still face liability if the hazard is unreasonably dangerous, or effectively unavoidable.
In this case, the possibility of ice or snow on the driveway was open and obvious by objective standards and was not unavoidable.